1) The current account section in a nation's balance of payments includes: 

A. its goods exports and imports, and its services exports and imports.
B.  foreign purchases of domestic assets.
C.  purchases of foreign assets.
D.  all of these.

2) The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the
question on the basis of this information. All figures are in billions of dollars.

   

Refer to the given data. The United States has a balance of goods: 
 

A.  deficit of $10 billion.

B.  surplus of $30 billion.
C.  deficit of $30 billion.
D.  surplus of $20 billion.

3) The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of
payments for the hypothetical country of Zippo.

   

Refer to the given information. The current account items for Zippo are: 
 

A.  1, 2, 3, and 4.
B.  1, 3, 4, 5, 7, and 9.
C.  6 and 8.
D.  1, 2, 4, 7, and 9.

4) If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then: 
 

A.  the peso has appreciated in value.

B.  Americans will buy more Mexican goods and services.
C.  more U.S. goods and services will be demanded by the Mexicans.
D.  the dollar has depreciated in value.
5) Depreciation of the dollar will: 
 

A.  decrease the prices of both U.S. imports and exports.

B.  increase the prices of both U.S. imports and exports.
C.  decrease the prices of U.S. imports but increase the prices to foreigners of U.S. exports.
D.  increase the prices of U.S. imports but decrease the prices to foreigners of U.S. exports.

6) Which of the following will generate a demand for country X's currency in the foreign exchange
market? 
 

A.  Travel by citizens of country X in other countries.

B.  The desire of foreigners to buy stocks and bonds of firms in country X.

C.  The imports of country X.

D.  Charitable contributions by country X's citizens to citizens of developing nations.

7) A Central Bank may be able to reduce the value of its currency against the foreign currency by: 
 

A.  selling its currency in the foreign exchange market.

B.  buying its currency in the foreign exchange market.
C.  selling foreign currencies in the foreign exchange market.
D.  increasing its domestic interest rates.

8) Answer the question on the basis of the following information. In 1985, the exchange rate between the U.S.
dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen.

Refer to the given information. Which one of the following might be a plausible explanation for the change in
the dollar-yen exchange rate from 1985 to 2003? 
 

A.  Japan exported much more to the United States during this period than it imported from the United States.
B.  Japan greatly increased its purchases of military equipment from the United States during this period.
C) Japan's government devalued the yen during this period
D) None of the above.

9) Which of the following transactions will not be included in the current account of the Balance of
Payments?
(1) India imports oil
(2) The expatriates in UAE send their money back home
(3) The Indian government buys US government securities
(4) None of the above

10) India’s forex reserves grow when RBI:

a)Sells dollars in the forex market

b) Buys dollars in the forex market
 c)Buys or sells dollars in the forex market
d) None of the above

11) The difference between FDI and FII is:

a) FDI is included in the capital account of the Balance of Payments but FII is included in the
current account of the Balance of Payments
b) FDI is included in the current account of the Balance of Payments but FII is included in the
capital account of the Balance of Payments
c) FDI includes only financial investments but FII includes technology inflows and other inputs
along with financial investments
d) FII includes only financial investments but FDI includes technology inflows and other inputs
along with financial investments.

12) When savings are more than investment in an economy, there is generally a:
a) Current Account deficit
b) Current Account surplus
c) balanced Current Account
d) Savings and Investment have no connection with the current account.

13) Rise in FII inflows in Singapore will lead to (all other factors remaining constant)
a) The appreciation of the U.S dollar with respect to Singapore dollar
b) The depreciation of the U.S dollar with respect to Singapore dollar
c) The appreciation of the Singapore dollar with respect to US dollar
d) b and c

14) USA has a current account deficit because:

(a) US has a trade deficit
(b) US invests more than it saves
(c) Americans are more of consumers than savers.
(d) All of the above

15) The following transaction is not included in the capital account of BOP
a) Foreign direct investment
b) Portfolio investment
c) Interest on loans
d) Borrowings from IMF

16) When the international price of petroleum products increases

( other factors remaining constant ) the rupee is likely to:

a) appreciate
b) depreciate
c) can’t say
d) this can have no effect on the exchange rate.

17) The difference between GDP and GNP is :

a) Net exports
b) Net factor income from abroad
c) Indirect taxes
d) Subsidies

18) When there is a surplus on the current account + capital account of the Balance of payments, the
adjustment is made in the:

a) Reserve account and there is an addition to the reserves

b) Reserve account and there is a depletion of the reserves
c) Trade account and there is a fall in trade receipts
d) Trade account and there is a rise in trade receipts

19) When there is a current account surplus, then the domestic currency is most likely to:

a) depreciate
b) appreciate
c) remain the same
d) be depleted from the reserves

20)Which of the following will lead to an appreciation of the rupee?

a) The RBI sells dollars in the market

b) There are increasing NRI remittances
c) FIIs have stepped up their investments in India
d) All of the above