Balance of PaymentsSivakumarPYQs - Prelims0 Welcome to Quiz on Balance of Payments Which of the following has have occurred in India after its liberalization of economic policies in 1991? 1. Share of agriculture in GDP increased enormously. 2. Share of India's exports in world trade increased. 3. FDI inflows increased. 4. India's foreign exchange reserves increased enormously. Select the correct answer using the codes given below: 1 and 4 only 2,3 and 4 only 2 and 3 only 1,2,3 and 4 Which one of the following is correct regarding stabilization and structural adjustment as two components of the new economic policy adopted in India? Stabilization is a gradual, multi-step process while structural adjustment is a quick adaptation process Structural adjustment is a gradual multi-step process, while stabilization is a quick adaptation process Stabilization and structural adjustment are very similar and complimentary policies. It is difficult to separate one from the other Stabilization mainly deals with a set of policies which are to be implemented by the Central government while structural adjacent is to be set it motion by the State governments One of the important goals of the economic liberalisation policy is to achieve full convertibility of the Indian rupee. This is being advocated because: Convertibility of the rupee will stabilize its exchange value against major currencies of the world It will attract more foreign capital inflow in India It will help to promote exports It will help India secure loans from the world financial markets at attractive terms Economic liberalisation in India started with: Substantial changes in industrial licensing policy The convertibility of Indian rupee Doing away with procedural formalities for foreign direct investment Significant reduction in tax rates With reference to the Indian economy after the 1991 economic liberalization, consider the following statements: 1. Worker productivity per worker (at 2004-05 prices) increased in urban areas while it decreased in rural areas. 2. The percentage share of rural areas in the workforce steadily increased. 3. In rural areas, the growth in the non-farm economy increased. 4. The growth rate in rural employment decreased. Which of the statements given above is/are correct? 1 and 2 only 3 and 4 only 3 only 1,2 and 4 Assertion (A): The rate of growth of India's exports has shown an appreciable increase after 1991. Reason (R): The Govt. of India has resorted to devaluation. Both A and R are true, and R is the correct explanation of A Both A and R are true, but R is not a correct explanation of A A is true but R is false A is false but R is true Consider the following statements: The price of any currency in international market is decided by the: 1. World Bank 2. Demand for goods/services provided by the country concerned 3. Stability of the government of the concerned country 4. Economic potential of the country in question of these statements: Codes: 1,2,3 and 4 are correct 2 and 3 are correct 3 and 4 are correct 1 and 4 are correct Assertion (A): Balance of Payments represents a better Picture of a country economic transactions with the rest of the world than the Balance of Trade Reason (R): Balance of Payments takes into account the exchange of both visible and invisible items whereas balance of Trade does not. Cades: Both A and R are individually true and ' R ' is the correct explanation of A. Both A and R are individually true but ' R ' is not the, correct explanation of A . A is true but R is false. A is false but R is true. The balance of payments of a country is a systematic record of All import and export transactions of a country during a given period of time, normally a year Good exported from a country during a year Economic transaction between the government of one country to another Capital movements from one country to another: With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristics? It is the investment through capital instruments essentially in a listed company. It is largely non-debt creating capital flow It is the investment which involves debt-servicing. It is the investment made by foreign institutional investors in the Government securities. With reference to the international trade of India at present, which of the following statements is/are correct? 1. India's merchandise exports are less than its merchandise imports. 2. India's imports of iron and steel, is chemicals, fertilisers and machinery have decreased in recent years. 3. India's exports of services are more than its imports of services. 4. India suffers from an overall trade/current account deficit: Select the correct answer using the code given below: 1 and 2 only 2 and 4 only 3 only 1,3 and 4 only Which one of the following is the correct sequence of decreasing order of the given currencies in terms of their value in Indian Rupees? US dollar, Canadian dollar, New Zealand dollar, Hong Kong dollar US dollar, New Zealand dollar, Canadian dollar, Hong Kong dollar US dollar, Hong Kong dollar, Canadian dollar, New Zealand dollar Hong Kong dollar; US dollar, New Zealand dollar, Canadian Dollar. With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? 1. Balance of trade 2. Foreign assets 3. Balance of invisibles 4. Special Drawing Rights Select the correct answer using the code given below. 1 only 2 and 3 1 and 3 1,2 and 4 The Capital Account Convertibility of the Indian Rupee implies: That the Indian Rupee can be exchanged by the authorised dealers for travel That the Indian Rupee can be exchanged for any major currency for the purpose of trade in goods and services That the Indian Rupee can be exchanged for any major currency for the purpose of trading financial assets None of the above Assertion (A): India's software exports increased at an average growth rate of 50 % since 1995-96 Reason (R): Indian software companies were cost-effective and maintained international quality. Both A and R are individually true, and R is the correct explanation of A Both A and R are individually true, but R is not the correct explanation of A A is true but R is false A is false but R is true Assertion (A): India does not export natural rubber. Reason (R): About 97 % of India s demand for natural rubber is met from domestic production. Both A and Rare true, and R is the correct explanation of A Both A and R are true, but R is Not a correct explanation of A A is true but R is false A is false but R is true Assertion (A): Devaluation of a currency may promote export. Reason (R): Price of the country's products in the international market may fall due to devaluation. Both A and R are true, and R is the correct explanation of A Both A and R are true, but R is not a correct explanation of A A is true but R is false A is false but R is true Assertion (A): Ceiling on foreign exchange for a host of current account transaction heads was lowered in the year 2000. Reason (R): There was a fall in foreign currency assets also. Both A and R are individually true, and R is the correct explanation of A Both A and R are individually true, but R is not the correct explanation of A A is true but R is false A is false but R is true Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and Latin American experience, which type of inflow is good for the host country? Commercial loans Foreign Direct Investment Foreign Portfolio Investment External Commercial borrowings Consider the following statements: Full convertibility of the rupee may mean: 1. Its free float with the international currencies 2. Its direct exchange with any other international currency at any prescribed place inside and outside the country 3. It acts just like any other international currency Which of these statements are correct? 1 and 2 1 and 3 2 and 3 1,2 and 3 Which of the following constitute Capital Account? 1. Foreign Loans 2. Foreign Direct Investment 3. Private Remittances 4. Portfolio Investment Select the correct answer using the codes given below. 1,2 and 3 1,2 and 4 2,3 and 4 1,3 and 4 Consider the following statements: The Indian rupee is fully convertible: 1. In respect of Current Account of Balance of payment 2. In respect of Capital Account of Balance of payment 3.Into gold Which of these statements is/are correct? 1 alone 3 alone 1 and 2 1,2 and 3 In the context of India, which of the following factors is/ are contributor/contributors to reducing the risk of a currency crisis? 1. The foreign currency earnings of India's IT sector. 2. Increasing the government expenditure. 3. Remittances from Indians abroad. Select the correct answer using the code given below. 1 only 1 and 3 only 2 only 1,2 and 3 only Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee? Curbing imports of non-essential goods and promoting exports Encouraging Indian borrowers to issue rupee denominated Masala bonds Easing conditions relating to external commercial borrowing Following an expansionary monetary policy If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. Not depending on short-term foreign borrowings 2. Opening up to more foreign banks 3. Maintaining full capital account convertibility. Select the correct answer using the code given below: 1 only 1 and 2 only 3 only 1,2 and 3 Considering the following statements: 1. Purchasing Power Parity (PPP) exchange rates are calculated by the prices of the same basket of goods and services in different countries. 2. In terms of PPP dollars, India is the sixth largest economy in the world. Which of the statements given above is/ are correct? 1 only 2 only Both 1 and 2 Neither 1 nor 2 Which one of the following regions of the world supplies the maximum of our imported commodities (in terms of rupee value)? Africa America Asia and Oceania Europe Consider the following items imported by India: 1. Capital goods 2. Petroleum 3. Pearls and precious stones 4. Chemicals 5. Iron and Steel The correct sequence of the decreasing order of these items (as per 94-95 figures), in terms of value is: 1,2,3,4,5 1,2,4,3,5 2,1,3,4,5 2,1,4,5,3 Which of the following would include Foreign Direct Investment in India? 1. Subsidiaries of foreign companies in India 2. Majority foreign equity holding in Indian companies 3. Companies exclusively financed by foreign companies 4. Portfolio investment Select the correct answer using the codes given below: 1,2,3 and 4 2 and 4 only 1 and 3 only 1,2 and 3 only In terms of economy, the visit by foreign nationals to witness the XIX commonwealth games in India amounted Export Import Production Consumption Consider the following actions which the government can take: 1. Devaluing the domestic currency. 2. Reduction in the export subsidy. 3. Adopting suitable policies which attract greater FDI and more funds from FIIs. Which of the above action/actions can help in reducing the current account deficit? 1 and 2 2 and 3 3 only 1 and 3 Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two? FII helps bring better management skills and technology, while FDI only brings in capital. FII helps in increasing capital availability in general, while FDI only targets specific sectors. FDI flows only into the secondary market while FII targets primary market FII is considered to be more stable than FDI. Which one of the following sets of commodities are exported to India by arid and semi-arid countries in the Middle East? Raw wool and carpets. Fruits and palm oil Precious stones and pearls Perfume and Coffee. Convertibility of rupee implies Being able to convert rupee notes into gold Allowing the value of rupee to be fixed by market forces Freely permitting the conversion of rupee to other currencies and vice versa Developing an international market for currencies in India Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). Assertion (A): An important policy instrument of economic liberalization is reduction in import duties on capital goods. Reason (R): Reduction in import duties would help the local entrepreneurs to improve technology to face the global markets. In the context of the above two statements, which one of the following is correct? Both A and R are true, and R is the correct explanation Both A and R are true, R is not a correct explanation A is true but R is false A is false but R is true Consider the following: 1. Foreign currency convertible bonds of 2. Foreign institutional investment with certain conditions 3. Global depository receipts 4. Non-resident external deposits Which of the above can be included in Foreign Direct Investments? 1, 2 and 3 3 only 2 and 4 1 and 4 Consider the following statements: The effect of devaluation of a currency is that it necessarily 1. Improves the competitiveness of the domestic exports in the foreign markets 2. Increases the foreign domestic currency value 3. Improves the trade balance of Which of the above statements is/are correct? 1 only 1 and 2 3 only 2 and 3 Time's up 0