FOREX Policy

Q.

What is fiscal deficit? What are its implications?

Q. Explain the relationship between marginal revenue and average revenue. Use diagram.

Q.

(a) What is meant by repo rate? How does the Central Bank use this measure to control inflationary conditions in an economy?

(b) What is meant by margin requirements? How does the Central Bank use this measure to control deflationary conditions in an economy?

Q. A government purchase or sale of currency in the foreign exchange market is called an market intervention.

1. open
2. exchange
3. free
4. stable

Q.

Should a current account deficit be a cause for alarm? Explain.

Q.

If the exchange rate changed from 2$=Rs.135to1.75$ = Rs. 105, which of the following is true?

1. The change cannot be determined.

2. The rupee has been devalued

3. The exchange rate has remained the same.

4. The rupee has been revalued

Q. Explain the role of "open market operations" in controlling the inflationary gap.

Q. Short Answer Type Questions:
What is meant by foreign exchange rate? Give three reasons why people desire to have foreign exchange.

Q. In $1955$, Imperial Bank of India, a leading commercial bank of that time, was nationalized and renamed as _____________.

1. Indian Bank
2. Central Bank of India
3. Bank of India
4. State Bank of India

Q. Give a reason for each of the following statements:
(i) The fixed income group is adversely affected during periods of inflation.
(ii) Selling costs are higher in Monopolistic Competition.
(iii) High rates of taxes reduce the savings capacity in an economy.
(iv) The demand for newspaper inelastic.

Q. Explain the situation of deficient demand in an economy. Also explain the role of Repo Rate in correcting this.

Q. Very Short Answer Type Questions
What is foreign exchange?

Q. Monetary policy to check inflation/ deflation includes _______.

1. manipulation in bank rate
2. manipulation in CRR/SLR
3. selective credit control
4. all the three

Q. What happens when the credit availability is restricted and credit made costlier?

Q. Distinguish between average revenue and marginal revenue. Also mention the relation between them.

Q. Explain the role of the following in correcting 'deficient demand' in an economy: (i) Open market operations. (ii) Bank rate.

Q. Bank rate is the selective credit control measure used by the central bank of the country.

1. true
2. false

Q. Answer the following questions.
What are the various measures of Quantitative Credit Control?

Q. Raising bank rate is aimed at the expansion of credit.

1. True
2. False

Q. What is meant by fiscal deficit? how is the fiscal deficit of the govt financed?

Q. To support the rupee, the RBI must:

1. raise interest rates.
2. lower interest rates.
3. buy rupees in the FOREX market.
4. sell rupees in the FOREX market.

Q. If the rupee is overvalued, it leads to ________ in the FOREX market.

1. Deficit
2. Cannot be determined
3. Surplus
4. Equilibrium

Q. Very Short Answer Type Questions:
The price of $1US$ Dollar has fallen from $Rs.50$ to $Rs.48$. Has the Indian currency appreciated or depreciated?

Q. How does the instrument of open market operations help during deficient demand?

Q. The measures to correct excess demand through monetary policy include:

1. Increase in Bank rate
2. Sale of government securities
3. Increase in CRR
4. All of the above

Q. ________ refers to the portion of total deposit of a commercial bank required to be kept with itself in cash.

1. Time Deposit
2. Term Deposit
3. SLR
4. CRR

Q. Teaser rates are related to which of the following types of loans?

1. Home Loans
2. Personal Loans
3. Auto Loans
4. Reverse Mortgage Loans

Q. What is meant by Repo Rate? How does the Central Bank use this measure to control inflationary conditions in an economy?

Q. What is 'excess demand'? Explain the role of 'Reverse Repo Rate' in removing it.

Q. How can a central bank control excess demand in an economy by making changes in the legal reserve requirements?