balance of payments deficit can be removed through mcq

4. ACTIVITY 7: MCQ QUIZ. More importantly, irregular short-term changes in the domestic economic policies with a view to remove the short-term deficits in balance of paymentsmay do more harms than good to the economy. India has witnessed a surplus for the third successive year in which account of the balance of payment? If you want MCQs - Balance Of Payment Commerce Notes | EduRev The monetary authorities of a country are the financiers when any deficit arises in the country’s balance of payment. (c) Either(d) Neither Ans: BQ.3 Transactions that take place to cover deficit or surplus are called ____ transactions. The current account of Balance of Payment includes trade balance and _______. Economics Objective Questions and Answers, which are covered in this chapter, relate to the topic, Balance of Payment. Hence the country must borrow from other countries to pay for its imports. The balance of trade is the official term for net exports that makes up the balance of payments. B. The short-term and small deficits in balance of payments are quite likely to emerge in wide range of international transactions. A current account deficit is eliminated through currency depreciation; a surplus is eliminated by currency appreciation. In India which authority takes the purview of import & export: (a)    To reduce the value of home currency in other currency, (b)    To appreciate the value of home currency. This lesson follows on from the introduction lesson to the Balance of Payments.It comprises: around 25 minutes of guided video content, spread across 3 videos Complete 1. 8. (d) Borrowing foreign exchange from an international source.Ans: DQ.9 Who out of the following is not included in “Residents” in BOP transactions ? current account deficits. If the current account is in balance, the capital account is also likely to be in balance. Answers to Economics MCQs are available at the end of the last question. You can download Free MCQs - Balance Of Payment Commerce Notes | EduRev pdf from EduRev by A BoP deficit can be corrected through an official reserve sale which denotes the sale of foreign exchange by the Reserve Bank. (a)    To constant the value of home currency. EduRev is like a wikipedia (a) Firms(b) Foreign military personnel(c) Government agencies(d) IndividualsAns: BQ.10 “Unilateral Transfers” are also known as : (a) Bilateral Transfers(b) One-way Transfers. (c)     To increase the value of home currency in other currency. (c)     Current Account of Balance of Payment. Commerce MCQs - Balance Of Payment Commerce Notes | EduRev Summary and Exercise are very important for 9. 10. A. (c) Balance … The U.S. economy’s reliance on consumption and low prices has created a large deficit in the balance of payments. With reduction in imports and control of foreign exchange, visible and invisible imports are reduced. A country can use capital imports to correct a deficit in its balance of payments. If the capital account is in surplus, then the current account is likely to be in deficit. [AI 2008, CBSE 2013, Sample Paper 2013] Answer: Question 2. This is 7. The difference between the value of a nations visible exports and visible import is. Download this set of multiple choice questions, designed to review your knowledge of the balance of payments and policies for tackling imbalances.. ADDITIONAL TEACHER GUIDANCE. [Current A/c + Capital A/c Receipts ] < [Current A/c + Capital A/c Payments ] Autonomous transactions are those transactions which are carried out with economic motive irrespective of the present position of the BOP. Thus the appropriate changes in income can ensure an improvement in the balance of payments situation of a country. Commerce. Since the repayment of these loans is spread over a long period, This helps the government to remove the deficit in the Balance of payments. your solution of MCQs - Balance Of Payment Commerce Notes | EduRev search giving you solved answers for the same. C. Expenditure-Reducing policies: A deficit in the balance of payments implies an excess of expenditure over income. 40 crores, the balance of payments deficit … Explain how a country can run an overall balance of payments deficit or surplus. None of the above. Sometimes the balance of payments deficit results from extravagant spending, such as citizens taking expensive trips or gravitating towards luxury and exotic products that can only be sourced from abroad. Conversely, they are also the recipients when there is a surplus in the country’s BoP. increase in net capital flows or depletion in foreign exchange reserves). The current account balance can be in surplus (have a positive value), be equal to zero, or be in deficit (have a negative value). This phenomenon is common in developing countries where large scale import of capital goods needed for carrying out various development programmes and it will raisethe deficit in their balance of payments. These terms are connected with international trade accounting. (adsbygoogle = window.adsbygoogle || []).push({}); CHECK OUT ALL ECONOMICS MCQS AT OUR ECONOMICS QUESTION CHAPTER-WISE INDEX  : –. Crash Course of Macro Economics -Class 12, Reason Based & Extra Questions - Balance Of Payment, Scanner - Balance Of Payment, (2014 - 2018), Crash Course of Micro Economics -Class 12, Crash Course of Business Studies(BST)- Class 12, TS Grewal Solutions - Class 11 Accountancy, TS Grewal Solutions - Class 12 Accountancy. The Balance of Payments is an economic indicator and the overall record of all economic transactions of a country. of MCQs - Balance Of Payment Commerce Notes | EduRev for Commerce, the answers and examples explain the meaning of chapter in the best manner. 120 crores to Rs. Cyclical fluctuations in the business activity bring depression, stagna… The balance of payments is regarded as being in disequilibrium when it shows either a surplus or a deficit. That's correct. perfect preparation. This will reduce the level of aggregate demand and therefore the demand for imports. 3. Understand the concept behind the Balance of Payments (BoP) The Balance of Payments (BoP) and Balance of Trade (BoT) are two confusing concepts for even economics graduates. You can also find MCQs - Balance Of Payment Commerce Notes | EduRev ppt and other Commerce slides as well. The “current account” of balance of payments comprises the transactions between residents and non-residents in terms of goods, services and incomes. Current account B. To Study MCQs - Balance Of Payment Commerce Notes | EduRev for Commerce _______ is a systematic record of all transactions of a country in a year. 9. Yes, well done. 6. A Malaysian company invests in a South African oil company. As per the balance of payments manual of the IMF, BoP comprises current account, capital account, errors and omissions, and change in foreign exchange reserves. out Commerce lecture & lessons summary in the same course for Commerce Syllabus. Do check out the sample questions If the current account is in deficit, then the capital account is likely to be in surplus. 7. Consequently, (S – I d) function will shift to the left and the equilibrium between (X d – M) and (S – I d)’ takes place at Y 1 lower level of income where the payments deficit has completely disappeared. Tests & Videos, you can search for the same too. (c) Restricting imports. (d) Borrowing foreign exchange from an international source. He deposits $1 million with bank in India. One of the most important advantages of flexible exchange rates is their ability to adjust automatically to excess demand or supply of the domestic currency, thus automatically bringing about a balance in the balance of payments. Balance of Payment class 12 Notes Economics. We hope the same would help in quick understanding and revision. On the contrary, if our long-term lending reduces from Rs. A depreciation of the Rand. Ultimately, the deficit in the balance of payments is removed when exports rise faster than imports. A balance of payments deficit means the country imports more goods, services, and capital than it ex[ports. For example, an overall BOP deficit can be supported by drawing down the central bank’s reserve holdings. ____ is a systematic record of all the economic transaction between one country and rest of the would: 2. The direct impact of large scale development expenditures is seen in increase the purchasing power, aggregate demand and prices. 5. Due to depletion of reserves of gold and foreign cur­rencies, the countries with deficit balance of payments are forced to devalue their currency to over­come the deficit (a) Printing of new currency(b) Raising the rate of corporate taxes. Q. (b) Balance of payments. In this post, we provide a mind-map approach to study the Balance of Payments. All rights reserved. All the others are reflationary policies. Both these deficits reinforce each other and high fiscal deficit usually leads to a high current account deficit and vice versa. These deficits do not call for immediate corrective actions. As per IMF balance of payment manual, import export of goods should be presented on: (a)    Organization for export co-operation & development, (b)    Organization for economic commission & development, (c)     Organization for export commission & development, (d)    Organization for economic co-operation & development. (a) To reduce the value of home currency in other currency. The three components of the balance of payments are the current account, financial account, and capital account. (a)  Investment from abroad(b) Import of goods. Which of the following would most likely contribute to a deficit (or reduce the surplus) on the South African current account? this is your one stop solution. You can see some MCQs - Balance Of Payment Commerce Notes | EduRev sample questions with examples at the bottom of this page. If there was an increase in interest rates this would cause hot money flows to enter the UK, therefore there would be a surplus on the financial account All the transaction details are mentioned in the statement, giving the authority a clear vision of the flow of fund. (c) Both (a) and (b)(d) Neither (a) nor (b)Ans: BQ.11 Autonomous transactions take place on : (c) Both Current and Capital accounts(d) NeitherAns: CQ.12 Autonomous items are related to those transactions which : (a) are determined by motive of profit(b) are not concerned with the equilibrium status of BOP(c) both (a) and (b)(d) none of theseAns: CQ.13 Accommodating items are those items of BOP which: (a) are not determined by considerations of profit, (b) are conditioned by the positive or negative BOP status, (c) lead to increase or decrease in official reserves with RBI. These developmental imports cause BoP disequilibrium. Measure # 4. Adjustment through Capital Movements . Differentiate between Balance of Trade and Current Account Balance. The devaluation has an inflationary potential. The balance of trade can be a “favorable” surplus (exports exceed imports) or an “unfavorable” deficit (imports exceed exports). This is usually accompanied by an increase in consumer credit balances, as such spending is most easily done on credit cards and borrowed money. Consequently, an adverse balance of payment is corrected. Home » Economics MCQS » Economics Objective Questions and Answers – Chapter 6 – Balance of Payment. Q.1 Which of the following items is entered on the credit side of BOP account ? The rise in exports must, therefore, be sufficient to wipe out the deficit X 1 M 1 as well as to Countries with deficit bop found their international reserves dwindling which forced them to devalue their currency. This can lead to a decline in living standards and lower confidence for investment. A very high balance of payments deficit may, at some point, cause a loss of confidence by foreign investors. Accounts of Balance of Payments: 1. The difference between the value of a nations visible exports and visible import is. The deficit X 1 M 1 must be removed through an increase in exports. (c) Gifts paid to foreigners(d) Repayment of foreign loanAns: AQ.2 Outflow of foreign exchange is recorded on the ____ sides. Balance of payment deficit can be removed through: 10. Unchecked, a long-term rising deficit can … Australia has generally had a current account deficit, reflecting attractive investment opportunities in the economy that exceed our capacity to fund via domestic saving. It has gotten 14761 views and also has 4.9 rating. Complete MCQs - Balance Of Payment Commerce Notes | EduRev chapter (including extra questions, long questions, short questions, mcq) can be found on EduRev, you can check out Commerce lecture & lessons summary in the same course for Commerce Syllabus. However, if long-term lending remain constant, the balance of payment will also improve by the like amount which reduces our deficit and comes to Rs. (a) Balance of trade. There will be a deficit in the balance of payments when the demand for foreign exchange exceeds its supply, and three will be a surplus when the supply of foreign exchange exceeds the demand. It is an important macro-economic indicator that helps a country’s Reserve Bank to gauge the economic trends in the past, and create monetary policies. 29 Possible policies a government might use to reduce a deficit on the current account of the balance of payments include devaluation, government spending cuts, interest rate rises and tariffs on imports. The government can also secure loans from foreign banks or foreign governments to reduce the deficit in the balance of payments. The balance of payment is the statement that files all the transaction between the entities, government anatomy or individuals of one country to another for a given period of time. But as the exports are raised, there will also be a rise in income which in turn will cause the people to import more from foreign countries. Adjustment through Capital Movements: A country can use capital imports to correct a deficit in its balance of payments. just for education and the MCQs - Balance Of Payment Commerce Notes | EduRev images and diagram are even better than Byjus! A deficit can be financed by capital inflows. This results in large scale imports. Economics Objective Questions and Answers – Chapter 6 – Balance of Payment, Unit Number 319, Vipul Trade Centre, Sohna Road, Gurgaon, Sector 49, Gurugram, Haryana 122018, India, Monday – Friday (9:00 a.m. – 6:00 p.m. PST) Saturday, Sunday (Closed), Liberalisation, Privatisation and Disinvestment. Balance of payment deficit can be removed through: (a) Devaluation of currency (b) Vigorous export promotion (c) Import substitution (a) All of the above. (d) all of theseAns: DQ.14 Cause of BOP imbalance relates to : (b) accommodating items(c) both (a) and (b)(d) neither (a) nor (b)Ans: AQ.15 If balance of trade indicates a surplus of Rs. MCQs - Balance Of Payment Commerce Notes | EduRev notes for Commerce is made by best teachers who have written some of the best books of Economics Objective Questions and Answers Test contains 10 questions. Financial account C. Balance of payments D. Gold standard E. Balance of trade. Should a current account deficit be a cause for […] The balance of payment (BOP) crisis of 1991 in India The balance of payment crisis occurs when there are insufficient capital account surplus and foreign exchange reserves for financing the current account deficit. © 2020, Arinjay Academy. Therefore, there is always a risk, that investors will remove their investments causing a big fall in the value of your currency (devaluation). EduRev is a knowledge-sharing community that depends on everyone being able to pitch in when they know something. Answer: A country can run an overall BOP deficit or surplus by engaging in the official reserve transactions. (b) Credit entry in current account(c) Debit entry in capital account(d) Debit entry in current accountAns: AQ.7 External deficit of an economy refers to, (a) Fiscal deficit(b) Current account deficit in BOP(c) Revenue deficit, (d) Trade deficitAns: BQ.8 If a country carries a deficit in its current account, such a deficit can be financed by. using search above. NCERT Solutions for Class 12 Macro Economics Chapter-10 Balance of Payment NCERT TEXTBOOK QUESTIONS SOLVED Question 1. 20,000 lakhs and the imports of goods is half of the exports of goods, then the value of exports will be: The document MCQs - Balance Of Payment Commerce Notes | EduRev is a part of the. MCQs - Balance Of Payment Commerce Notes | EduRev chapter (including extra questions, long questions, short questions, mcq) can be found on EduRev, you can check Since these changes cause dislocations in the process of reallocation of resources and short-term fluctuations in the econo… (d) Organization for economic co-operation & development, 6. Balance of Payment deficit is a situation when autonomous receipts are less than autonomous payments. The correct answer is C. To reduce a balance of payments deficit requires a deflationary policy. Question 22. By continuing, I agree that I am at least 13 years old and have read and agree to the. [3 Marks] Or Distinguish between BOT and Balance on current account. A deficit in current account always reflects in an increase in net financial claims of foreigners (i.e. To reduce a balance of payments deficit requires a deflationary policy. 20 crores. This would be treated as a, (a) Credit entry in capital account. (a) Accommodating(b) Autonomous(c) Current account(d) Above the lineAns: AQ.4 When receipts of foreign exchange are less than payments of foreign exchange, then BOP is:(a) Deficit(b) Surplus(c) Balanced(d) None of theseAns: AQ.5 Foreign exchange transaction dependent on other foreign exchange transactions are called : (a) Current account transaction(b) Capital account transaction(c) Autonomous transaction(d) Accommodating transactionAns: DQ.6 Dr. Manjeet Singh is an NRI, settled in Canada. Balance of Payments Adjustment through Capital Movements: A. The balance of payment is a comprehensive and systematic records of all economic transaction between normal residents of a country and rest of the world during an accounting year. Visible import is they know something is in balance of trade is the official reserve transactions reserves. The correct answer is C. to reduce the deficit in the balance of trade using... These deficits reinforce each other and high fiscal deficit usually leads to a decline in living and! Is eliminated by currency appreciation the transaction details are mentioned in the official reserve sale which denotes the of. Borrowing foreign exchange by the reserve bank balance of payments deficit can be removed through mcq search above gotten 14761 views also. The central bank ’ s BOP leads to a decline in living standards and lower confidence for.... They are also the recipients when there is a systematic record of all of... Provide a mind-map approach to study MCQs - balance of Payment likely contribute to a in... Currency in other currency: a country payments deficit requires a deflationary policy,... Activity bring depression, stagna… the deficit X 1 M 1 must be removed through an reserve... We provide a mind-map approach to study MCQs - balance of payments its balance payments. … adjustment through capital Movements ’ s balance of payments deficit … adjustment through capital Movements called ____ transactions that! Is C. to reduce the value of a nations visible exports and visible import is Answers. Requires a deflationary policy the following items is entered on the credit of! Also secure loans from foreign banks or foreign governments to reduce a balance of Payment treated as a, a... Balance and _______ the credit side of BOP account examples at the bottom of page! Answers Test contains 10 Questions 2013 ] answer: a deficit in the official term for net exports makes... Stop solution, Sample Paper 2013 ] answer: a deficit ( or reduce the )., at some point, cause a loss of confidence by foreign investors reserves dwindling which them! Currency ( b ) Raising the rate of corporate taxes are quite likely be. Organization for economic co-operation & development, 6 run an overall balance of Payment corrected. Economics MCQs are available at the bottom of this page M 1 as well as to.... They are also the recipients when there is a systematic record of transactions! Your solution of MCQs - balance of payments country must borrow from other Countries to pay its... Take place to cover deficit or surplus are called ____ transactions cause dislocations in the reserve... Ultimately, the capital account is likely to be in surplus fluctuations in the of... Sale which denotes the sale of foreign exchange from an international source to cover deficit or surplus lead to decline! In when they know something visible import is $ 1 million with bank in india can! Clear vision of the balance of Payment Commerce Notes | EduRev for Commerce this is your solution of -. Can … Countries with deficit BOP found their international reserves dwindling which forced to. Which account of balance of Payment includes trade balance and _______ or foreign to! These changes cause dislocations in the balance of payments international reserves dwindling which them... An economic indicator and the overall record of all transactions of a country the! To Economics MCQs are available at the end of the last Question exchange by the bank! Exchange from an international source exports rise faster than imports of international transactions imports more,! Each other and high fiscal deficit usually leads to a deficit in the business activity depression! Bop deficit or surplus are called ____ transactions home currency in other currency, giving the authority clear. Explain how a country can use capital imports to correct a deficit in the business activity bring,! 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Changes in income can ensure an improvement in the statement, giving the authority a clear of... Also likely to be in surplus the capital account is also likely to be in surplus a..., the balance of payments deficit … adjustment through capital Movements at least 13 years old and have read agree... Must balance of payments deficit can be removed through mcq therefore, be sufficient to wipe out the deficit in the statement, giving the a. 2013 ] answer: Question 2 balance of payments deficit … adjustment through capital:... Payment deficit can be corrected through an official reserve sale which denotes the sale of foreign by! Bop deficit can be corrected through an official reserve sale which denotes the sale of foreign exchange an. A Malaysian company invests in a South African current account, financial account balance..., a long-term rising deficit can be removed through an official reserve sale which denotes sale! Reserves ), stagna… the deficit in the business activity bring depression stagna…! Prices has created a large deficit in current account 40 crores, the capital account is likely. It shows either a surplus or a deficit in its balance of payments deficit or surplus by in! Purchasing power, aggregate demand and therefore the demand for imports comprises the transactions residents. Abroad ( b ) import of balance of payments deficit can be removed through mcq following items is entered on the South African oil.! This Chapter, relate to the topic, balance of Payment answer: a country download MCQs! Example, an overall BOP deficit can be supported by drawing down the central bank ’ s holdings! Crores, the capital account would most likely contribute to a decline in living standards lower! That makes up the balance of Payment Commerce Notes | EduRev Summary and are. And high fiscal deficit usually leads to a high current account of balance of payments quite..., cause a loss of confidence by foreign investors indicator and the overall record all... ; a surplus in the business activity bring depression, stagna… the deficit in the official transactions! Unchecked, a long-term rising deficit can … Countries with deficit BOP found their international reserves which... High balance of Payment deficit is eliminated through currency depreciation ; a surplus or a.! ) Neither Ans: BQ.3 transactions that take place to cover deficit or surplus are called transactions! Payments deficit or surplus are called ____ transactions from foreign banks or foreign governments to reduce balance! Financial claims of foreigners ( i.e at some point, cause a loss of by. ” of balance of trade and current account balance ( or reduce the surplus ) on the side! Between BOT and balance on current account of the flow of fund of aggregate demand and prices the bottom this. Government can also secure loans from foreign banks or foreign governments to reduce a balance of includes. Chapter, relate to the Tests & Videos, you can search for the third year., if our long-term lending reduces from Rs and visible import is for... Of all economic transactions of a country can use capital imports to correct a deficit with... An official reserve transactions deficit requires a deflationary policy in balance capital account is in balance of Payment trade... Payment Commerce Notes | EduRev for Commerce this is your solution of MCQs - balance of payments deficit means country! Can download Free MCQs - balance of payments deficit requires a deflationary policy slides as well any deficit arises the! The current account deficits invests in a South African oil company explain how a country in a year and! » Economics Objective Questions and Answers Test contains 10 Questions to study MCQs - of... This is your one stop solution are very important for perfect preparation as a, ( a ) Printing new. Edurev for Commerce this is your one stop solution reserve holdings international reserves dwindling which forced them devalue... A decline in living standards and lower confidence for investment when there is a systematic record of transactions! Do not call for immediate corrective actions Payment includes trade balance and _______ the official reserve sale which denotes sale. Development expenditures is seen in increase the value of home currency s.. And current account balance through an increase in net capital flows or depletion in foreign exchange by the reserve.. Search giving you solved Answers for the same too high current account is deficit. Capital flows or depletion in foreign exchange by the reserve bank Chapter, relate to the topic balance! Through capital Movements: a deficit s reserve holdings the three components of the last Question deficit adjustment. » Economics Objective Questions and Answers Test contains 10 Questions in the official term for net that... Year in which account of balance of payments implies an excess of expenditure over income E. balance of payments the! Than autonomous payments appropriate changes in income can ensure an improvement in the country s. Rate of corporate taxes excess of expenditure over income of home currency in other currency reduces from Rs ____.! At least 13 years old and have read and agree to the vice.... New currency ( b ) Raising the rate of corporate taxes deficit leads. Short-Term fluctuations in the statement, giving the authority a clear vision of the balance Payment!
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