Q 1 – The price of one currency in terms of another is known as _________
(A) Foreign exchange rate
(B) Trade rate
(C) Interest rate
(D) Balance of Payment
Ans. (A) Foreign exchange rate
Q 2 – The market where the national currencies are traded for one another is known as ________
(A) Domestic exchange market
(B) Foreign exchange market
(C) Bazaar
(D) Shop
Ans. (B) Foreign exchange market
Q 3 – Increase in the value of foreign commodities is known as _________
(A) Revaluation
(B) Devaluation
(C) Inflation
(D) None of these
Ans. (B) Devaluation
Q 4 – Decrease in the value the foreign commodities is known as _________
(A) Revaluation
(B) Devaluation
(C) Deflation
(D) All of these
Ans. (A) Revaluation
Q 5 – What is the cause of the devaluation of any country’s currency?
(A) Increase in the domestic inflation rate
(B) Domestic real interest rates are less than foreign interest rates
(C) Much increase in the income
(D) All of these
Ans. (D) All of these
Q 6 – The operation of daily nature in the foreign exchange market is known as ________
(A) Spot market
(B) Forward market
(C) Domestic market
(D) International market
Ans. (A) Spot market
Q 7 – The operation of future delivery in the foreign exchange market is known as ________
(A) Spot market
(B) Current market
(C) Forward market
(D) Domestic market
Ans. (C) Forward market
Q 8 – Hybrid in management of fixed and flexible exchange rate is known as ________
(A) Managed to float
(B) Crawling Peg
(C) Wider Bands
(D) None of these
Ans. (A) Managed floating
Q 9 – When was the gold standard abandoned?
(A) 1930’s
(B) 1920’s
(C) 1940’s
(D) 1950’s
Ans. (B) 1920’s
Q 10 – Trade of visible items between the countries is known as ________
(A) Balance of Payment
(B) Balance of Trade
(C) Deficit Balance
(D) All of these
Ans. (B) Balance of Trade
Q 11 – When the import and export of visible items are equal, the situation is known as _______
(A) Balance of Trade
(B) Balance of Payment
(C) Trade Surplus
(D) Trade Deficit
Ans. (A) Balance of Trade
Q 12 – When there is a favourable balance of trade?
(A) X > M
(B) X = M
(C) X < M
(D) None of these
Ans. (A) X > M
Q 13 – When there is unfavourable balance of trade?
(A) X > M
(B) X = M
(C) X < M
(D) None of these
Ans. (C) X < M
Q 14 – The trade of visible and invisible items is known as _________
(A) Balance of Payments
(B) Balance of Trade
(C) Deficit of interest
(D) Profit
Ans. (A) Balance of Payments
Q 15 – Other things remaining unchanged, when in a country the price of foreign currency rises, national income is:
(A) Likely to rise
(B) Likely to fall
(C) Likely to rise and fall both
(D) Not affected
Ans. (A) Likely to rise
Q 16 – Other things remaining the same, when in a country the market price of foreign currency falls, national income is likely:
(A) To rise
(B) To fall
(C) To rise or to fall
(D) To remain affected
Ans. (B) To fall
Q 17 – Which one is the king of the exchange rate?
(a) Fixed Exchange Rate
(b) Flexible Exchange Rate
(c) Both (a) and (b)
(d) None of the above
Ans. (c) Both (a) and (b)
Q 18 – Which of the following is true?
(a) Fixed exchange rate is determined by the government
(b) Flexible exchange rate is determined by market forces (demand and supply of foreign exchange)
(c) Both (a) and (b)
(d) None of the above
Ans. (c) Both (a) and (b)
Q 19 – Which one is a kind of fixed exchange rate?
(a) Gold Standard System of Exchange Rate
(b) Bretton Woods System of Exchange Rate
(c) Both (a) and (b)
(d) None of the above
Ans. (c) Both (a) and (b)
Q 20 – Which one is a merit of the fixed exchange rate?
(a) Promotes Foreign Trade
(b) Induces Foreign Capital
(c) Increases Capital Formation
(d) All the above
Ans. (d) All the above
Q 21 – Which one is a demerit of the fixed exchange rate?
(a) Ignores National Interests
(b) Restricted Movement of Capital
(c) Sudden Fluctuations in Exchange Rates
(d) All the above
Ans. (d) All the above
Q 22 – Which one is a merit of the flexible exchange rate?
(a) Simple System
(b) Continuous Adjustments
(c) Improves Balance of Payments
(d) All the above
Ans. (d) All the above
Q 23 – Which one is a demerit of the flexible exchange rate?
(a) Bad Results of Low Rate
(b) Uncertainty
(c) Instability in Foreign Exchange
(d) All the above
Ans. (d) All the above
Q 24 – Which one is a source of the demand for foreign exchange?
(a) Imports of Goods and Services from Abroad
(b) Investment in Foreign Nations
(c) Gift Scheme to Foreign Nations
(d) All the above
Ans. (d) All the above
Q 25 – Foreign exchange is determined by:
(a) Demand for foreign currency
(b) Supply of foreign currency
(c) Demand and supply in the foreign exchange market
(d) None of the above
Ans. (c) Demand and supply in a foreign exchange market
Q 26 – The forms of foreign exchange market is/are:
(a) Spot market
(b) Forward market
(c) Both (a) and (b)
(d) None of these
Ans. (c) Both (a) and (b)
Q 27 – The foreign exchange rate is determined by:
(a) Government
(b) Bargaining
(c) World Bank
(d) Demand and Supply forces
Ans. (d) Demand and Supply forces
Q 28 – By exchange rate we mean:
(a) How much local currency we have to pay for a foreign currency
(b) How much of a foreign currency we have to pay for another foreign currency
(c) The rate at which foreign currency is bought and sold
(d) All of these
Ans. (d) All of these
Q 29 – Balance of Trade =?
(a) Export of Visible Items – Imports of Visible Items
(b) Export of both Visible and Invisible Items – Import of both Visible and Invisible Items
(c) Import of Visible Items – Export of Visible Items
(d) None of the above
Ans. (a) Export of Visible Items – Imports of Visible Items
Q 30 – Which items are included in the Balance of Payments?
(a) Visible Items
(b) Invisible Items
(c) Capital Transfers
(d) All the above
Ans. (d) All the above