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

1
Point out a merit of flexible exchange rate
  • A
    Frees the individual from holding any foreign exchange reserves
  • B
    Frees the private sector from holding any foreign exchange reserves
  • C
    None
  • D
    Frees the govt from holding any foreign exchange reserves
    Correct
2
Point out a merit of flexible exchange rate
  • A
    None
  • B
    Optimum resource allocation
    Correct
  • C
    Inefficient resource allocation
  • D
    Resource underutilisation
3
Point out a demerit of fixed exchange rate
  • A
    Has no effect on the stock of gold
  • B
    BOP deficit countries run down the stock of gold
    Correct
  • C
    BOP surplus countries run down the stock of gold
  • D
    None
4
Point out a demerit of fixed exchange rate
  • A
    Has no effect on the stock of gold in BOP surplus countries
  • B
    BOP surplus countries face inflation
    Correct
  • C
    BOP surplus countries face inflation
  • D
    None
5
Point out a demerit of flexible exchange rate
  • A
    Prevents speculation in forex market
  • B
    None
  • C
    Has no effect on speculation in forex market
  • D
    promotes speculation in forex market
    Correct
6
A component of current account of the BOP account is
  • A
    Change in Borrowing and lending by the govt.
  • B
    Investment by the govt.
  • C
    Investment to and from abroad
  • D
    Exports and imports of services
    Correct
7
A component of current account of the BOP account is
  • A
    Investment to and from abroad
  • B
    Change in Borrowing and lending by the govt.
  • C
    Unilateral transfers Investment to and from abroad
    Correct
  • D
    Investment by the govt.
8
Point out a demerit of flexible exchange rate
  • A
    None
  • B
    Wide fluctuations promotes foreign trade
  • C
    Wide fluctuations do not affect foreign trade
  • D
    Wide fluctuations hamper foreign trade
    Correct
9
Managed floating exchange rate is a system in which the
  • A
    The govt. intervenes but cannot take decisions
  • B
    The govt. intervenes and take decisions
  • C
    The govt. does not intervene
  • D
    The govt. intervene whenever they feel it appropriate
    Correct
10
A component of capital account of balance of payment is
  • A
    Investment to and from abroad
    Correct
  • B
    Investment from abroad
  • C
    Borrowing from abroad
  • D
    Investment by the govt.
11
A component of capital account of balance of payment is
  • A
    Change in Borrowings from abroad.
  • B
    Change in Borrowing and lending by the govt.
  • C
    Change in lending to abroad.
  • D
    Change in foreign exchange reserves
    Correct
12
If exchange rate increases, this will make
  • A
    Can’t say
  • B
    The demand for our exports will rise
    Correct
  • C
    The demand for our exports will fall
  • D
    The demand for our exports will not change
13
Identify one of the types of balances in BOP account
  • A
    None of these
  • B
    All Invisible items
  • C
    All visible items
  • D
    Accommodating Items
Answer
Not Available
14
A disequilibrium in Balance of payment can be corrected by
  • A
    Reducing exports
  • B
    Promoting entrepot trade
  • C
    None of these
  • D
    Reducing imports
    Correct
15
A disequilibrium in Balance of payment can be corrected by
  • A
    Appreciation
  • B
    Devaluation
  • C
    Revaluation
  • D
    Depreciation
    Correct