INTERNATIONAL FINANCE - FEBRUARY 2017 MCQS

T.Y B.COM

SEMESTER - 6

INTERNATIONAL FINANCE

(IF)

MCQS - FEBRUARY 2017

1. Under flexible exchange rate, automatic adjustments in the balance of payments is bring through changes in

A) General level of prices

B) income

C) Rates of exchanges

D) Interest rate

2. Purchasing power parity theory of international trade reformulated and developed by

A) Wheatley

B) Krugman

C) Gustav Cassel

D) David Ricardo

3. Under the automatic mechanism of BOP adjustment

A) M > X → gold outflow → MS ↓ ,r ↑ , & it will discourage capital inflows, leading to restoration of equilibrium in BOP
B) M > X → gold outflow → MS ↓ ,r ↑ ,& it will attract capital inflows, leading to restoration of equilibrium in BOP
C) M > X → gold outflow → MS ↓ ,r ↓ ,& it will discourage capital inflows, leading to restoration of equilibrium in BOP
D) M > X → gold outflow → MS ↑ , r ↓, & it will attract capital inflows, leading to restoration of equilibrium in BOP

4. Which of these statements is/are correct?

i. automatic BOP adjustment mechanism involves flexibility in domestic prices, incomes and interest rates and fixed exchange rates

ii. accounting balance BOP is the same as BOP equilibrium

A) Both (i) & (ii) are Incorrect

B) Both (i) & (ii) are correct 

C) Only (ii) 

D) Only (i) 

5. Which of the following items is not a part of Errors and Omissions Account ?

A) Smuggling

B) Accumulation of Foreign Reserves 

C) Illegal and secret capital movements

D) Statistical errors

6. Direct or Portfolio, Private or Government, Tied or Untied, Soft or Hard, are all references to

A) Movement on international liquidity account

B) Movement on the current account

C) Movement of capital and investment

D) Movement of the unilateral transfers Account

7. Under the automatic Mechanism of BOP adjustment

A) M > X → gold outflow → MS↓→ r ↓→ l ↑→ Y ↑→ M ↓, & therefore restoration of BOP equilibrium
B) M > X → gold outflow → MS↑→ r ↑→ l ↑→ Y ↑→ M ↑, & therefore restoration of BOP equilibrium
C) M > X → gold outflow → MS↓→ r ↑→ l ↑→ Y ↑→ M ↑, & therefore restoration of BOP equilibrium
D) M > X → gold outflow → MS↓→ r ↑→ l ↓→ Y ↓→ M ↓, & therefore restoration of BOP equilibrium

8. The J-curve effect explains that:

A) After Currency depreciation price effects are stronger in the short run; volume effects are stronger in the long run.

B) After currency depreciation the volume of trade is affected in the short run, but in the long run the change in trade is offset by the change in relative prices.

C) Appreciation of a currency will always worsen the trade balance unless it is accompanied by an expenditure reducing policy.

D) Large exchange rate changes may lead to changes in trade patterns that persist even after exchange rates return to their initial level.

9. Accommodating adjustment in BOP excludes:

A) Capital lending to other countries

B) Import of gold

D) Portfolio investment

C) Accumulation of foreign reserves

10. Under deficit tendency of BOP there is _______ curves. 

A) Rightward shift in SS & leftward shift in DD 

B) Leftward shift in both DD & SS

C) Rightward shift in DD & leftward shift in SS 

D) Leftward shift in DD & rightward shift in SS

11. Devaluation as a solution to Deficit in BOP is subject to:

A) Fairly elastic Demand for exports

B) Political disturbances

C) Restrictive monetary policies

D) High Investments in Industries

12. Which of the following is function of foreign exchange:

A) Transfer function 

B) Hedging function

C) Credit Function 

D) All of the above

13. __________ may be defined as "error or omission on account of disparity in the compilation of trade data or estimated unrecorded transfers of funds". 

A) Statistical Discrepancy

B) Balance of Current Account

C) Balance of Capital Account

D) All of the above

14. Which of the following statement is INCORRECT about the Balance of Payments:

A) It is one of the oldest and most important statistical statements for any country.

B) It is a systematic record of all economic transactions between the residents of a given county and residents of the rest of the world in an accounting period.

C) It implies a situation of comfortable equilibrium.

D) It records both payments and receipts by a country.

15. Which of the following is not a reason for disequilibrium?

A) Per Capital Income

B) National Output

C) National Spending

D) Money Supply

16. If the foreign exchange rate is above the equilibrium exchange rate it amounts to

A) Overvaluation of the foreign exchange 

B) Overvaluation of domestic currency

C) Undervaluation of the foreign exchange 

D) Appreciation in the value of domestic currency

17. The concepts of premium and discount are associated with

A) Forward exchange rate

B) Spot exchange rate

C) Purchase and sale of foreign exchange for immediate delivery

D) Equilibrium foreign exchange rate

18. Which of the following statements is incorrect?

A) Hedgers are risk takers

B) Hedgers are cautious and risk averse

C) Hedgers enter into forward transactions

D) Speculator are risk takers

19. Government intervention in the foreign exchange market is known as

A) Devaluated exchange rate

B) Fixed exchange ratio

C) Directed exchange rate

D) Supported exchange rate 

20. Foreign Direct Investment (FDI) comes under

A) Current account 

B) Capital account

C) Official reserve account 

D) None of the above

21. In the Balance of Payments account, the transfer payments are included in which one of the following

A) Official reserves account

B) Service account

C) Currents account

D) Capital account

22. Which one of the following items is included in the capital account of the balance of payments of a country?

A) Commercial borrowings

B) Invisibles services

C) Private transfers

D) Investment income

23. An open economy can reduce Deficit in BOP through Long term Capital inflows generated by

A) Reducing Quotas

B) Export promotion policies

C) Banking Sector reforms

D) Liberalizing FDI

24. The rate of exchange can be defined as

A) The rate at which the currency of one is converted into US Dollars.

B) The rate at which Indian rupee is converted into any other currency.

C) The rate at which one currency is converted into another currency

D) The rate declared by the reserve bank of India for the conversion of Indian rupee into US Dollars 

25. Foreign exchange speculation refer to the act of taking a foreign exchange

A) Only gain risk

B) No Risk

C) Uncovered Risk 

D) Covered Risk

26. Demand curve for foreign exchange would shift downward when

A) Import propensity in the country has gone down

B) Country has adopted inward looking strategy of development

C) Country has imposed restriction on forewing travel

D) All of the above

27. "Foreign exchange" is a collective term embraces all kinds of ______ in foreign money. Complete the sentence with any of the options:

A) Negotiable claims

B) Financial instruments

C) Capital movements

D) Banking activities 

28. Balance of payments on current account is also referred to as __________

A) International Liquidity Account

B) Service Account 

C) Net Foreign Investment 

D) Unilateral Transfer Account

29. BOP equilibrium refers to a situation where

A) Autonomous debit transactions equal autonomous credit transactions

B) Autonomous debit transactions are balanced by accommodating transactions

C) Autonomous surplus transactions are balanced by accommodating transactions

D) Accounting balance in the balance of payments exists

30. Which of the following is not consistent with the notion of BOP equilibrium?

A) Equilibrium foreign exchange rate

B) Demand for foreign exchange = supply of foreign exchange

C) Accounting balance in the BOP

D) Receipts from autonomous transactions are equal to payments for autonomous transactions

For More Detail Contact Us And Follow On Study For Buddies

Thank You