Open Economy Macroeconomics CBSE Questions & Answers

Open Economy Macroeconomics

This is Economics Class 12 Open Economy Macroeconomics CBSE Questions & Answers. There are 15 questions in this test with each question having around four answer choices.

Questions & Answers

Currency appreciation occurs when

A
Increase in the price of the domestic currency
B
decrease in the domestic currency price of the foreign currency
Correct
C
decrease in the price of the domestic currency
D
Increase in the domestic currency price of the foreign currency

When currency becomes less valuable for the Rest of the world, it is called

A
Devaluation
B
Revaluation
C
Depreciation
Correct
D
Appreciation

Nominal exchange rate is the price of

A
Foreign currency in terms of the domestic currency
Correct
B
domestic currency in terms of the Foreign currency
C
Only B
D
None

Real exchange rate is the price of

A
Price of goods abroad relative to domestic goods
Correct
B
None
C
Price of goods abroad relative to domestic goods
D
Only B

To buy domestic or foreign goods, the more relevant is

A
None
B
Real exchange rate
Correct
C
Nominal exchange rate
D
Only B

Managed floating exchange rate is a system in which the

A
the central bank or Government allow the exchange rate to determined by market forces
Correct
B
the Government allow the exchange rate to determined by market forces
C
None of the above
D
the central bank allow the exchange rate to determined by market forces

A component of capital account of balance of payment is

A
Borrowing from abroad.
B
Lending to abroad.
C
Borrowing and lending to and from abroad
Correct
D
Borrowing and lending from the govt.

Which transactions determine the balance of trade?

A
Exports of goods and imports of goods
Correct
B
Investment to and from abroad
C
Change in Borrowing and lending by the govt.
D
Borrowing and lending to and from abroad

Balance of trade is in surplus when

A
the value of exports of goods is equal to the value of imports of goods
B
the value of exports of goods is greater than the value of imports of goods
Correct
C
None of these
D
the value of imports of goods is greater than the value of exports of goods

A deficit in BOP occurs

A
When autonomous foreign exchange payments equals autonomous foreign exchange receipts
B
When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts
Correct
C
When autonomous foreign exchange payments is in negative deficit
D
When autonomous foreign exchange payments is less than autonomous foreign exchange receipts

Devaluation is a

A
Reduction in the price of domestic currency in the foreign exchange market by the govt.
B
Reduction in the price of foreign currency in terms of domestic currencies by the govt.
C
Reduction in the price of domestic currency in terms of all foreign currencies by the govt.
Correct
D
Increase in the price of domestic currency in terms of all foreign currencies by the govt.

Depreciation is a

A
Reduction in the price of domestic currency in terms of all foreign currencies by the govt
B
Reduction in the price of domestic currency in the foreign exchange market by the govt
C
Reduction in the price of foreign currency in terms of domestic currencies in the market
Correct
D
Reduction in the price of foreign currency in terms of domestic currencies in the market

When price of a foreign currency rises its supply also rises.

A
Never
B
Sometimes
C
Always
Correct
D
Can’t say

If exchange rate increases, this will make

A
Domestic country's goods becomes cheaper to residents
B
Domestic country's goods becomes cheaper to foreigners
Correct
C
Domestic country's goods becomes dearer to foreigners
D
Domestic country's goods becomes dearer to residents

The demand for foreign exchange and the exchange rate has

A
Inverse relationship
Correct
B
Direct relationship
C
Exponential relationship
D
Indirect relationship