Balance of Payments

Q.

What is the difference between intra bank beneficiary and inter bank beneficiary?

Q.

Differentiate between devaluation and depreciation.

Q.

What are accomodating items?

Q. Suppose the exchange rate between the Rupee and the dollar was Rs. 30 = 1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.

Q.

Name three invisible items of balance of payments?

Q.

The balance of payments of a country includes:

1. Official transfers of foreign currency

2. Smuggling transactions

3. Loans and aid

4. Both a and c

Q.

BoP is measured as the:

1. difference between external and internal flow of gold

2. difference between invisible items of exports and imports

3. difference between visible items of exports and imports

4. difference between all receipts of foreign exchange and payments of foreign exchange

Q.

Who agreed to loan funds to help India recover from its BOP Crisis?

1. World Bank

2. International Monetary Fund

3. Royal Bank of Scotland

4. Bank of England

Q. Explain the role of the Reserve Bank of India as the "lender of last resort".

Q.

The sale and purchase of financial assets is not a part of the BoP. State true or false.

1. True

2. False

Q. A central bank is a lender of last resort.

1. True
2. False

Q.

Discuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.

Q. If 1 dollar = Rs. 60 changes to 1 dollar = Rs. 69 by the mandate of the RBI, has occurred.

1. devaluation
2. revaluation
3. appreciation
4. depreciation

Q.

Which of the following incidents triggered the BOP crisis in 1991?

1. Mounting external debt

2. Rising import bill

3. Rising foreign reserves

4. Devaluation

Q. Accommodating items of trade are undertaken in order to maintain the balance in the BOP account.

1. True
2. False

Q.

In a BOP crisis, foreign reserves of the economy are generally rising. State true or false.

1. False

2. True

Q. Which of the measures the value of currency against a basket of other currencies?

1. Real Exchange Rate
2. Effective Exchange Rate
3. Real Effect Exchange Rate
4. Nominal Exchange Rate

Q. Give Reasons or Explain the following:
Central Bank acts as a lender of last resort.

Q. _____ is also called lender of the last resort in India.

1. SBI
2. CBI
3. RBI
4. UTI

Q. In India ______ is referred to as the lender of the last resort.

1. SBI
2. UTI
3. Central Bank
4. RBI

Q. Explain the lender of last resort' function of the Central Bank.

Q. Which of the following is a source of informal sector of loan?

1. Money lenders
2. Government
3. Cooperatives
4. Banks

Q. Why does the demand for foreign currency fall and supply rises when its price rises? Explain.

Q.

A debit item is:

1. A positive item

2. A negative item

3. Inflow item

4. Outflow item

Q.

Suppose that 1$= Rs. 60.

The demand for rupees increases and then the exchange rate is such that 1$=Rs. 55. This is an example of which of the following:

1. Depreciation

2. Appreciation

3. Revaluation

4. Devaluation

Q. ___________ is a record of all economic transaction made between the residents of one country with the residents of the rest of the world.

1. Balance of trade
2. Balance of current account
3. Balance of payments
4. Balance of capital account

Q. Unilateral transfers made to abroad will be recorded as a debit item of BOP on current account.

1. True
2. False

Q.

The number of accounts in the BOP is:

1. 1

2. 2

3. 3

4. 4

Q. Which of the following will not be true if exchange rates are determined according to purchasing power parity(PPP)?

1. If two countries have zero rate of inflation, their bilateral exchange rate will be constant
2. In response to a monetary shock, there will occur a overshooting of exchange rates
3. The prices of goods will be the same in all the countries when converted at the going rate of exchange
4. Exchange rate between any two currencies will be equal to the inflation differential between the two concerned economies

Q.

In India, the balance of payments has

1. Regularly been skewed to a surplus

2. Always been balanced

3. Regularly been skewed to a deficit

4. Remained constant