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
Foreign exchange rate of a country is the
  • A
    price of a foreign factor in terms of the domestic factor
  • B
    price of a foreign currency in terms of the domestic currency
    Correct
  • C
    price of a foreign good in terms of the domestic good
  • D
    price of a foreign trade in terms of the domestic trade
2
A source of supply of foreign exchange is
  • A
    Gifts
  • B
    Donations given
  • C
    Imports
  • D
    Exports
    Correct
3
Foreign exchange means
  • A
    Domestic currency
  • B
    Any currency other than the domestic currency
    Correct
  • C
    Any currency
  • D
    US Dollars
4
Balance of payment Accounts is a
  • A
    Systematic record of all expenditures between the residents of a country and abroad
  • B
    Systematic record of economic transactions between the residents of a country & abroad
    Correct
  • C
    Systematic record of all economic transactions between the residents of a country
  • D
    Systematic record of all receipts between the residents of a country and abroad
5
A source of demand for foreign exchange is
  • A
    Smuggle of goods & services
  • B
    Export of goods & services
  • C
    Import of goods & services
    Correct
  • D
    Brokerage of goods & services
6
A deficit in balance of trade indicates
  • A
    That the imports of good are equal to the exports
  • B
    That the imports of good are greater than the exports
    Correct
  • C
    That the imports of good are less than the exports
  • D
    None of the above
7
Fixed exchange rate is
  • A
    is fixed by the businesses in an economy
  • B
    is fixed by the foreign exchange market
  • C
    is fixed by the anybody in an economy
  • D
    is fixed by the Government in an economy
    Correct
8
Flexible exchange rate is
  • A
    Can’t say
  • B
    Determined
    Correct
  • C
    Ordered
  • D
    Fixed
9
Flexible exchange rate is determined by
  • A
    Government
  • B
    Supply of foreign exchange
  • C
    Demand for foreign exchange
  • D
    Market forces of demand and supply
    Correct
10
Point out a merit of fixed exchange rate
  • A
    Ensures demand for the fixed exchange rate
  • B
    None
  • C
    Ensures supply of the fixed exchange rate
  • D
    Ensures stability of the fixed exchange rate
    Correct
11
Point out a merit of flexible exchange rate
  • A
    Eliminates overvaluation of currencies only
  • B
    Eliminates overvaluation or undervaluation of currencies
    Correct
  • C
    None
  • D
    Eliminates undervaluation of currencies only
12
Point out a demerit of fixed exchange rate
  • A
    Ensures supply of the fixed exchange rate
  • B
    None
  • C
    Contradicts the objectives of free markets
    Correct
  • D
    Promotes the objectives of free markets
13
Point out a demerit of flexible exchange rate
  • A
    D. None
  • B
    Creates instability
    Correct
  • C
    C. Has no effect on stability
  • D
    B. Creates stability
14
A component of current account of the BOP account is
  • A
    Investment by the govt.
  • B
    Exports and imports of goods
    Correct
  • C
    Investment to and from abroad
  • D
    Change in Borrowing and lending by the govt.
15
Currency depreciation occurs when
  • A
    Increase in the price of the domestic currency
  • B
    Increase in the domestic currency price of the foreign currency
    Correct
  • C
    decrease in the price of the domestic currency
  • D
    decrease in the domestic currency price of the foreign currency