Bihar Board Class 12 (Arts) Open Economy Macroeconomics — practice questions
71 free MCQs with worked solutions. Tap any question for the answer + explanation, or practice them all in the app.
Practice Bihar Board Class 12 (Arts) Open Economy Macroeconomics in the app →The balance of payments records a country's transactions with whom?Which account records trade in goods and services and transfer payments?Which set lists the transfer payments of the current account?Balance of Trade is the gap between exports and imports of what?How is the export of goods entered in the Balance of Trade?A country imports more goods than it exports. This situation is calledWhich of these is counted among invisibles in the current account?A nation with a current account surplus is described asA country whose current account payments exceed its receipts is aWhat does the capital account of the balance of payments record?An Indian buys a UK car company. How is this entered in India's BoP?Selling shares of an Indian company to a Chinese buyer is aWhich of these is a component of the capital account?A surplus arises in the capital account whenA current account deficit must be financed by aIn a BoP deficit, the reserve bank uses its reserves byA fall in official reserves signals an overall balance of paymentsOfficial reserve transactions matter most under which regime?Why does the BoP include an item called errors and omissions?Which feature marks an autonomous international transaction?Which item is treated as the accommodating item in the BoP?The price of one currency in terms of another is called theIf one US dollar costs Rs 50, the exchange rate isWhich is a major participant in the foreign exchange market?Which transaction raises the supply of foreign exchange to India?Other things equal, a rise in the price of foreign exchange makes importsWhich exchange rate system is set by market demand and supply?Under a completely flexible system, what do central banks do in the forex market?Under a floating system the rate moves from Rs 50 to Rs 70 per dollar. The rupee hasWhen the rupee appreciates against the dollar, an Indian needs to payAt Rs 80 per pound, an investor buys 1000 pounds expecting Rs 85. Profit if right?If investors expect the pound to gain value, buying it today pushes the rate up and makes the beliefA rise in imports shifts the demand curve for foreign exchangeA country whose demand grows faster than the world's usually sees its currencyWhich theory predicts long-run exchange rates under floating?A shirt costs $8 in the US and Rs 400 in India. By PPP, the rate isA Rs 400 shirt in India costs $8 in the US. Indian prices rise 20% and US prices 50%. New PPP rate?A rise in interest rates at home often leads the domestic currency toBonds in country A pay 8% and equally safe bonds in B pay 10%. The interest rate differential isIn a fixed exchange rate system, who sets the rate?If a fixed rate is set above equilibrium, there is excess supply of dollars and the RBI mustA government raising the fixed rate to make its currency cheaper is calledDevaluation differs from depreciation because devaluation happensAggressive buying of a currency that forces the government to devalue is aFixed rates were prone to speculative attacks before the collapse ofA main advantage of flexible rates is that governmentsUnder flexible rates, movements in the exchange rate automatically correctWhich system is also called dirty floating?Under managed floating, official reserve transactions areIn a closed economy, demand for domestic goods comes from consumption, government andThe open economy income identity can be written asA positive value of net exports (exports above imports) implies aImports depend on income Y and real exchange rate R asThe marginal propensity to import is the fraction of an extra rupee of income spent onThe real exchange rate compares the price ofGiven a consumption propensity of 0.8 and an import propensity of 0.3, the open multiplier isA closed economy where people spend four fifths of extra income has a multiplier ofThe open economy multiplier is smaller than the closed one becauseAn open economy has c = 0.9 and m = 0.1. Its autonomous spending multiplier equalsUnder a gold standard, a country with a trade surplus gets a net inflow ofIn gold standard adjustment, a gold inflow raises money supply and leads toWhich two institutions were set up under the Bretton Woods arrangement?Under Bretton Woods, which currency alone stayed convertible into gold?The Bretton Woods system came to an end between which years?A BoP crisis occurs when a nation cannot pay forWhich 1997 event led emerging economies to rethink reliance on free markets?Who developed the theory of comparative advantage?A stronger currency tends to make a nation's exportsAfter Bretton Woods, the principal de facto reserve currency has been theIf outflows exceed inflows, all else equal, a currency is likely to come under pressure toWhich of these is part of the current account as per the BoP definition?