TY B.COM
SEMESTER - 6
INTERNATIONAL FINANCE
MCQS - 2020
MID SEMESTER EXAMINATION
(1) If the demand elasticities are perfectly inelastic the rise in the price in imported good will
(A) Reduce its consumption
(B) Rise its consumption
(C) Have no change in consumption
(D) None of the above
(2) The J - Curve effect states that devaluation
(A) Makes the balance of payment (BOP) deficit in the long run
(B) Makes the balance of payment deficit in the short run
(C) Makes the balance of payment deteriorate in the short run and improves in the long run
(D) Makes the BOP surplus in the short run and BOP deficit in the long run
(3) If devaluation worsens the terms of trade, then the national income
(A) Will improve
(B) Will have adverse effect
(C) Will have no effect
(D) None of the above
(4) Under the Bretton woods system exchange rates were
(A) Rigidly fixed
(B) Fixed within the given bond
(C) Flexible with no constraints
(D) All of the above
(5) Under automatic BOP adjustment Mechanism, given the fixed exchange rates, the equilibrium in the BOP is brought about through
(A) The prices are flexible
(B) The interest rate, prices are flexible
(C) The income level, interest rate and prices are fixed
(D) The changes in the income levels, interest rate and prices
(6) Shift in demand for foreign exchange makes the individual to move on the same demand curve
(A) True
(B) False
(C) Partially true
(D) None of the above
(7) Which one of the following terms is normally denoted for the technique of avoiding foreign exchange risk ?
(A) Dumping
(B) Discounting
(C) Hedging
(D) Deflating
(8) Purchasing Power Parity theory is related with
(A) Interest rate
(B) Bank rate
(C) Wage rate
(D) Exchange rate
(9) Which one of the following is not taken into consideration for analyzing absolute version of purchasing power parity theory ?
(A) Price level Remains constant
(B) Free trade between countries
(C) No transportation cost
(D) Existence of tariffs
(10) Which of the following states that the equilibrium exchange rate is equal to the ratio of the changes in the price levels of the trading nations ?
(A) The relative theory of exchange rate determination
(B) The absolute purchasing power parity theory
(C) The relative purchasing power parity theory
(D) The absolute theory of exchange rate determination
(11) The instantaneous exchange of national currencies at ongoing rate is known as
(A) Forward transaction
(B) Spot transaction
(C) Daily transaction
(D) Exchange transaction.
(12) The systematic record in terms of double entry book keeping for countries receipt and payments is known as
(A) Balance of trade
(B) Accounts for payment and receipt
(C) Balance of payments
(D) Income and expenditure account
(13) Interest, Profits, dividends and royalties received from foreign countries are known as
(A) Capital services
(B) Capital movement
(C) Income for the organization
(D) All the above
(14) Investment on stocks and bonds are classified in the balance of payment as
(A) Long term investment
(B) Short term capital repatriation
(C) Portfolio investment
(D) Government loans
(15) Concept of basic balance in the balance of payment does not include
(A) Automatic transaction
(B) Accommodating transaction
(C) Short term capital
(D) None of the above
(16) Supply curve of foreign exchange
(A) Horizontal straight line parallel to X - axis
(B) Vertical straight line parallel to Y - axis
(C) Slope downwards
(D) Slope upwards
(17) Depreciation of domestic currency leads to rise in
(A) Exports
(B) Imports
(C) Both (A) & (B)
(D) Neither (A) nor (B)
(18) A change from Rs. 140 = $2 to Rs 60 = $1 indicates that the value of rupee is
(A) Appreciating
(B) Depreciating
(C) Neither (A) nor (B)
(D) Both (A) and (B)
(19) Imports of goods & services give raise to ________ for the foreign exchange.
(A) Supply
(B) Demand
(C) Both (A) & (B)
(D) Neither (A) & (B)
(20) Other things remaining unchanged, when in a country the price of foreign currency rises, given the marginal propensity to import, national income is
(A) Likely to rise
(B) Likely to fall
(C) Likely to rise and fall both
(D) Unaffected
(21) If any economy lagging behind in technological advancement for long period that economy may suffer
(A) Cyclical disequilibrium
(B) Structural disequilibrium
(C) Secular disequilibrium
(D) All of the above
(22) Supply of imports and exports remain _______ in devaluation.
(A) Elastic
(B) Highly inelastic
(C) Perfectly elastic
(D) Highly elastic
(23) The process of devaluation of domestic currency refers to the followings
(A) Official reduction of value of domestic currency
(B) Increase in the exchange rate of the same
(C) Deliberate action by the monetary authority
(D) All of the above
(24) The success of devaluation can be possible only when
(A) The nature of elasticity of demand is favourable
(B) Domestic people are ready to forgo domestic goods for export
(C) Tariffs are not introduced
(D) All of the above.
(25) If the elasticity of foreign demand for exports of the devaluing country is perfectly inelastic,
(A) Devaluation will have adverse effect
(B) Devaluation will have positive effect
(C) Devaluation will have no change
(D) None of the above
(26) Autonomous transaction are also known as
(A) Below the line transaction
(B) Above the line transaction
(C) Automatic transaction
(D) Autonomous service transaction
(27) Full employment equilibrium in the balance of payment is also known as
(A) Potential equilibrium
(B) True balance
(C) Market equilibrium
(D) Autonomous equilibrium
(28) If economy is enjoying balance of payment surplus then consequences would be
(A) Decrease interest rate
(B) Increase national income
(C) Increase price level
(D) All of the above
(29) Function of foreign exchange market is
(A) To transfer purchasing power among countries
(B) To provide credit fot foreign trade
(C) For Hedging facilities
(D) All of the above.
(30) If balance of trade is Rs - 1600 crore and value of imports is Rs. 4000 crore then the value of exports will be
(A) Rs. 5600 crore
(B) Rs. 2400 crore
(C) Rs. 4000 crore
(D) Rs. $1500 crore
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