CLASS – 12TH

MACRO ECONOMIC
BALANCE OF ECONOMICS
QUESTION: - 1

A country exported goods worth rs 600 crores, whereas, its imports amounted to rs 700 crores.
Calculate the volume of balance of trade and indicate its nature.

ANSWER

Balance of trade (BOT) = Exports – Import = 600 – 700 = Rs (-) 100 crores

BOT is unfavourable to the extent of Rs 100 crores as imports are more than exports.
QUESTION: - 2

If the value of exports of a country is Rs 1,000 crores and the value of imports is Rs 600 crores,
how much will be the trade balance?

ANSWER

Trade balance = Exports – imports = 1,000 – 600 = Rs 400 crores.

QUESTION: - 3

Calculate the value of imports when balance of trade is Rs (-) 400 crores and the value of
exports is Rs 300 crores.

ANSWER

Balance of trade = exports – import

So, Imports = Exports – Balance of trade = 300-(-) 400= Rs 700 crores

QUESTION: - 4

The Balance of trade shows a deficit of Rs 300 crores. The value of exports is Rs 500 crores.
What is the value of imports?

ANSWER

Balance of trade = Exports – imports

So, Imports = exports – balance of trade = 500 – (-) 300 = Rs 800 crores.
QUESTION: - 5

The balamnce of trade shows a deficit of Rs 5,000 crores and the value of imports are Rs 9,000
crores. What is the value of exports?

ANSWER

Balance of trade = Exports – imports

So, Exports = Balance of trade + Imports = ( -) 5,000 + 9,000 = Rs 4000 crores.

QUESTIONS: - 6

Assertion (A) – In balance of payments, repayment of loans by Indian government to Japanese

governmentwill be reflected as credit item.

Reason (R) – It will be reflected as debit item as it leads to outflow of foreign exchange.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 7

Assertion (A) – accommodating items of trade are undertaken in order to maintain the
balance in the BOPaccount.

Reason (R) – Accommodating transactions are compensating capital transactions which are
undertaken tocorrect disequilibrium in autonomous items of BOP.

a) Both Assertion (A) and Reason (R) are true

b) Both Assertion (A) and Reason (R) are false
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 8

Assertion (A) – Foreign exchange received on account of export of jute will be recorded in
capital account.

Reason (R) – it is a component of current account.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 9

Assertion (A) – Autonomous items are also known as ‘below the line’ items.

Reason (R) – Autonomous items are also known as ‘above the line’ items. (Accommodating
items are also known as ‘below the line’ items.)

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

QUESTIONS: - 10

Assertion (A) – unilateral transfers made to abroad will be recorded as a debit item of BOP on
currentaccount.

Reason (R) – it leads to outflow of foreign exchange.

a) Both Assertion (A) and Reason (R) are true

b) Both Assertion (A) and Reason (R) are false
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Both Assertion (A) and Reason (R) are true

 QUESTIONS: - 11

Assertion (A) – Balance of payments is a stock concept.

Reason (R) – It is a flow concept as it is related to a given period of time.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

QUESTIONS: - 12

Assertion (A) – borrowing by government from World Bank to finance the BOP deficit will
be recorded inthe capital account.

Reason (R) – It will be recorded in the capital account as it relates to claims and liabilities of
financial nature.

a) Both Assertion (A) and Reason (R) are true

b) Both Assertion (A) and Reason (R) are false
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Both Assertion (A) and Reason (R) are true

 QUESTIONS: - 13

Assertion (A) – current account records receipts and payments of transactions relating to
visible items only.

Reason (R) – current account contains the receipts and payments relating to all transactions
of visible items, invisible items and unilateral transfers.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 14

Assertion (A) – Deficit n balance of trade indicates deficit in balance of payments also.

Reason (R) – balance of trade (BOT) is only a part of balance of payments (BOP) and deficit
in BOT does not indicatethe nature about balance in BOP.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 15

Assertion (A) – autonomous transactions take place in capital account only.

Reason (R) – autonomous transactions take place in both current and capital accounts.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

QUESTIONS: - 16

Assertion (A) – Excess of foreign exchange receipts over foreign exchange payments on
account of accommodating transactions equals deficit in the balance of payments.

Reason (R) – excess of foreign exchange payments over foreign exchange receipts on
account of autonomous transactions leads to deficit in the balance of payments.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 17

Assertion (A) – export and import of machines are recorded in capital account of
the balance ofpayments account.

Reason (R) – It will be recorded in the current account of the balance of payments account.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

QUESTIONS: - 18

Assertion (A) – current account of balance of payments account records only exports
and imports ofgoods and services.

Reason (R) – in addition to exports and imports of goods and services, current account
also records unilateral receipts and payments.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

 QUESTIONS: - 19

Assertion (A) – Foreign investments are recorded in the capital account of balance of
payments.

Reason (R) – foreign investments are recorded in the capital account of

balance of payments as such investment cause a change in the assets of the
country.

a) Both Assertion (A) and Reason (R) are true

b) Both Assertion (A) and Reason (R) are false
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Both Assertion (A) and Reason (R) are true.

 QUESTIONS: - 20

Assertion (A) – profits received from investments abroad is recorded in capital account.

Reason (R) – it is recorded in current account as it neither affects foreign exchange

assets nor foreign exchange liabilities.

a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Assertion (A) is the false but Reason (R) is true.

QUESTIONS: - 21

Assertion (A) – import of machines is recorded in current account.

Reason (R) – All imports and exports of goods are recorded in trade account which is a
part of current account, because it is simply import/export of a good.

a) Both Assertion (A) and Reason (R) are true

b) Both Assertion (A) and Reason (R) are false
c) Assertion (A) is the true but Reason (R) is false.
d) Assertion (A) is the false but Reason (R) is true.

Both Assertion (A) and Reason (R) are true

QUESTIONS: - 22

Who out of the following is not included in “Residents” in BOP transactions?

a) Firms
b) Foreign military personnel
c) Government agencies
d) Individuals

Foreign military personnel

QUESTIONS: - 23

An accounting statement that provides a systematic record of all the economic transactions,
between residents of a country and the rest of the world is

a) Balance of Payments
b) Balance of Trade
c) Government Budget
d) None of these

Balance of Payments
QUESTIONS: - 24

Balance of Payments is a concept.

a) Stock
b) Flow
c) Both (a) and (b)
d) Neither (a) nor (b)

Flow
QUESTIONS: - 25

Inflow of foreign exchange is recorded on the _______ side.

a) Credit
b) Debit
c) Both (a) and (b)
d) Neither (a) nor (b)

Credit
QUESTIONS: - 26

When receipts of foreign exchange are more than payments of foreign

exchange, BOP is:

a) Balanced

b) Surplus

c) Deficit

d) None of these

Surplus
QUESTIONS: - 27

“Unilateral Transfers” are also known as:

a) Bilateral Transfers
b) One-way Transfers
c) Both (a) and (b)
d) Neither (a) nor (b)

One-way Transfers
QUESTIONS: - 28

Balance on ‘Balance of Trade’ can be:

a) Surplus
b) Balanced
c) Deficit
d) Either (a) or (b)

Either (a) or (b)

QUESTIONS: - 29

Which of the following is not a component of Balance of Payment?

a) Current account
b) Capital account
c) Nominal Account
d) None of these

Nominal Account
 QUESTIONS: - 30

Export and import of goods is also known as:

a) Indivisible Trade
b) Visible Trade
c) One-sided transactions
d) Unrequited transfers

Visible Trade
QUESTIONS: - 31

Refers to the difference between exports and imports

of visible items.

a) Balance of payments

b) Balance of trade

c) Bothe (a) and (b)

d) Neither (a) nor (b)

Balance of trade
 QUESTIONS: - 32

Autonomous transactions take place on

a) Current Account
b) Capital Account
c) (c) Both (a) and (b)
d) Neither (a) nor (b)

(c) Both (a) and (b)

QUESTIONS: - 33

__________transactions are undertaken to cover the deficit or surplus in

autonomous transactions.

a) Current Account
b) Current Account
c) Accommodating
d) None of these

Accommodating
QUESTIONS: - 34

________is the difference between value of goods sold to the rest of the world and
value of goods imported from rest of the world.

a) Balance of payment
b) Balance of trade
c) Balance of current account
d) Balance of capital account

Balance of trade
QUESTIONS: - 35

Gifts and remittances to abroad are recorded on the:

a) Credit side of Current Account

b) Debit side of Capital Account
c) Debit side of Current Account
d) Credit side of Capital Account

Debit side of Current Account

 QUESTIONS: - 36

Export of machinery is recorded on the:

a) Debit side of Current Account

b) Credit side of Current Account
c) Credit side of Capital Account
d) Debit side of Capital Account

Credit side of Current Account

QUESTIONS: - 37

Surplus in BOP arises when:

a) Autonomous Payments > Autonomous Receipts

b) Accommodating Receipts > Accommodating Payments

c) Accommodating Payments > Accommodating Receipts

d) Autonomous Receipts > Autonomous Payments

Autonomous Receipts > Autonomous Payments

QUESTIONS: - 38

Autonomous transactions take place on:

a) Current Account only

b) Capital Account only
c) Both Current and Capital Accounts
d) Neither Current Account nor Capital
Account

Both Current and Capital Accounts

 QUESTIONS: - 39

‘Import of Machinery’ is recorded in the ______ Account and

‘Borrowings from abroad’ is recorded in the _______ Account

a) Current, Capital
b) Capital, Current
c) Capital, Capital
d) Current, Current

Current, Capital
QUESTIONS: - 40

Foreign exchange transactions dependent on other foreign exchange

transactions are called:

a) Current Account Transactions

b) Capital Account Transactions
c) Autonomous Transactions
d) Accommodating Transaction

Accommodating Transaction