T.Y B.COM
SEMESTER - 6
INTERNATIONAL FINANCE
(IF)
MCQS : UNIT - 3
---> FDI
---> IMF AND INTERNATIONAL LIQUIDITY
----> INTERNATIONAL LIQUIDITY
---> SPECIAL DRAWING RIGHTS (SDR) “PAPER GOLD”
FDI
1. According to _____ FDI means the “Investment that is made to acquire a lasting interest in an enterprise, operating in an ECONOMY other than that of investor.”
[A] World bank
[B] IMF
[C] WTO
[D] RBI
2. Which thing involves the investment as well as some degree of control (at least 10 to 25%) and participation in management?
[A] FDI
[B] Stock exchange
[C] FII
[D] FPI
3. In FDI, there is an injection of foreign money, technology, entrepreneurship, ____________and so on.
[A] Managerial skill
[B] politics
[C] corruption
[D] power
4. Primary aim of the FDI is?
[A] To have the 20% profit share in management
[B] To have the investor’s effective voice in the management of the enterprise.
[C] To have the investor’s effective share in profit of the enterprise.
[D] To have the promoters effective voice in the management of the enterprise.
5. ______ is purely motivated by the profit without any managerial control.
[A] FDI
[B] FPI
[C] FII
[D] MNC
6. Following are the objectives / motivations of FDI…
[A] Sale expansion
[B] Resource acquisition
[C] Diversification
[D] All of the above
7. The FDI can be distinguished into following two categories.
[A] Horizontal Foreign Investment (HFI)
[B] Horizontal direct investment
[C] Vertical foreign Investment (VFI)
[D] Both A and C
8. Investment of a firm in foreign country to provide same product which it produces in its home country, it is an example of which investment?
[A] HFI
[B] VFI
[C] FPI
[D] MNC
9. LG makes investment in India to produce home appliances it is an example of which investment?
[A] VFI
[B] FDI
[C] FPI
[D] HFI
10. Which investment includes geographical (spatial) diversification of firm’s product line?
[A] VFI
[B] HFI
[C] FPI
[D] FII
11. Which investment is meant for integration process in the production?
[A] HFI
[B] FPI
[C] VFI
[D] FII
12. Which investment includes Backward Vertical Integration and Forward Vertical Integration?
[A] VFI
[B] FPI
[C] FII
[D] HFI
13. HFI integration takes place at different stages of value addition process. True or false?
[A] True
[B] False
[C] Partly true
[D] Can’t say
14. In Which Integration, a firm (Manufacturer of Finished product) makes an investment in the foreign country to produce the intermediate goods, which are to be used in its domestic production process?
[A] Backward vertical integration
[B] Forward vertical integration
[C] Both A and B
[D] Only B
15. In Which types of investment firm becomes its own supplier of the intermediate goods?
[A] Forward vertical integration
[B] Backward vertical integration
[C] Only B
[D] Both A and B
16. India’s oil refinery (e.g. IOCL) makes an investment in the extraction plants of oil rich countries outside India. It is called ______ Vertical Integration.
[A] Backward
[B] Forward
[C] Horizontal
[D] Straight
17. In Which investment a firm (Manufacturer of Finished product) makes an investment in the foreign country to sell or market it directly to the foreign buyers?
[A] Backward
[B] Forward
[C] Horizontal
[D] Straight
18. India’s oil refinery (e.g. IOCL) makes an investment in the Petrol pumps, Gasoline pumps in the countries outside India. It is called ____ Vertical Integration.
[A] Backward
[B] Forward
[C] Horizontal
[D] Straight
19. The main object of the FDI is to acquire / retain control over the markets and productive resources. True or False?
[A] True
[B] False
[C] Partly true
[D] Can’t say
20. Major areas of the FDI include...
[A] Oil
[B] Ores
[C] Service
[D] All of the above
21. FDI is advantageous to both lending nations and borrowing nations. True or False?
[A] True
[B] False
[C] Partly true
[D] Can’t say
22. Advantages to the LENDING nation includes
[A] FDI creates “additional source” of supply of required goods
[B] FDI raises the “purchasing power” of borrowing nation in foreign market
[C] FDI Provides Export benefits in long – run:
[D] All of the above
23. In of FDI, if there is condition that the borrowing nation should spend the proceeds only on the exports of lending country. it is called?
[A] Soft loan
[B] Tied loan
[C] Grant
[D] None
24. Advantages to the BORROWING nation Includes?
[A] FDI helps to “offset temporary BOP deficit”:
[B] FDI serves as “additional source” of capital formation:
[C] FDI brings “entrepreneurial talents and technical know-how” and FDI serves as “source of financing the war”:
[D] All of the above
25. When a borrowing nation gets a monetary gold from the lending nation, the borrowing nation becomes stronger in terms of the monetary base. True or False?
[A] True
[B] False
[C] Partly true
[D] Can’t say
26. When the money supply in the borrowing nation increases, it creates positive impact on the________
[A] Prices,
[B] Demand and
[C] Incomes.
[D] All of the above
27. When FDI comes into the country, it creates inflow of capital. It is registered as ________
[A] Debit item in the capital account of the BOP.
[B] Credit item in the capital account of the BOP.
[C] Credit item in the current account of the BOP.
[D] Debit item in the current account of the BOP.
28. Inflow of FDI helps the borrowing nation to remove....
[A] Debt
[B] loan
[C] The temporary BOP deficit without any financial burden of the BOP
[D] The permanent BOP deficit without any financial burden of the BOP
29. When country wants to develop and grow faster, it needs not only the capital but also the pre – requisites of growth such as _______
[A] Entrepreneurial talents
[B] Latest technical knowhow.
[C] Only A
[D] Both A and B
30. When FDI is allowed, the poor countries get entrepreneurial talents, technical knowledge, managerial expertise, professional marketing strategies and so on. True or False?
[A] False
[B] True
[C] Partly false
[D] Can’t say
31. Negative Impacts Of FDI Includes....
[A] Over dependence of host country on foreign technology.
[B] Threat to domestic industry.
[C] Distortions in wage & salary structure:
[D] All of the above
INTERNATIONAL LIQUIDITY
1. Concept of international liquidity is associated with?
[A] BOP
[B] International payments
[C] Deficit
[D] International debt
2. International payments arise out of....
[A] International trade in goods and services
[B] International capital movements.
[C] Only B
[D] Both A and B
3. What is refers to generally accepted official means of setting imbalance in international payments.
[A] GOLD
[B] International liquidity
[C] BOP
[D] IMF
4. International liquidity includes all those assets which are internationally acceptable without lose of value in discharge of debts. True or false?
[A] False
[B] True
[C] Partly true
[D] Can’t say
5. Dollar reserves of countries other than the U.S.A and Pound sterling reserves of the countries other than U.K. These two are known as.....
[A] “Key currencies” of the world.
[B] Main currencies
[C] Dominant currencies
[D] Powerful currencies
6. Which Items / Elements are Included in International Liquidity?
[A] The official reserves of gold and foreign exchange held by monetary authorities of a country.
[B] The foreign exchange earning [net surplus in current and capital current A/c]
[C] The borrowing facilities available from international monetary institutions such as IMF.
[D] All of the above
7. The supply of international liquidity includes:
[A] Gold mines of a country
[B] Foreign exchange earnings
[C] Unilateral transfers
[D] All of the above
8. Capital inflow, & Receipt of gold and foreign exchange by the monetary authority of a country Is a part supply of international liquidity.
True
9. Demand for international liquidity arises out Of.....
[A] Demand for imported goods and foreign services
[B] Unilateral transfers
[C] Capital outflow
[D] All of the above
10. Reasons for shortage of international liquidity includes…..
[A] Deficit in BOP
[B] Attitudes of developed countries
[C] High Tariff Barriers and Uneven Distribution of International Reserves
[D] All of the above
11. What Are The Results Of Devaluation Of Home Currency?
[A] Increase in Imports
[B] Decrease in Imports
[C] Increase in Exports
[D] Both B and C
12. In most of the less developed countries of third world, there is persistent deficit in BOP. Further, their deficit is continuously rising, due to continuous rise in international prices. TRUE or FALSE?
[A] True
[B] False
[C] Partly True
[D] Both A and C
13. Less developed countries are unable to increase their exports and export earnings Because Of Following Reasons.
[A] Heavy Tariff
[B] Low Tariff
[C] Government Control
[D] Deficit Bop
14. There Is Uneven Distribution of International Reserve In Favor Of _____________ Countries
[A] Developing
[B] Developed
[C] Underdeveloped
[D] Only A and B
15. Measures to solve the problem of international liquidity includes
[A] Limiting Imports:
[B] Export Promotion:
[C] Increase in BOP Surplus:
[D] Both A and B
16. The developed countries should try to reduce their BOP surplus by following measures..
[A] To accept payment from developing countries in the form of their domestic currency.
[B] To accept the goods of developing countries in exchange of their exports.
[C] To change in Official Rate of Exchange (Devaluation):
[D] All of The Above
IMF AND INTERNATIONAL LIQUIDITY
1. Which of the following statement is not true about the International Monetary Fund?
[A] IMF was established along with the word bank
[B] IMF is the result of the Bretton Woods conference
[C] Christine Lagarde is the current Chief Executive Officer of the IMF
[D] Currently 193 countries are the members of the IMF
2. When was IMF established?
[A] Dec. 27, 1945
[B] Jan. 30, 1947
[C] Jan.1, 1946
[D] Sept. 24, 1947
3. Which of the following statement is NOT correct regarding the membership of the IMF?
[A] Currently its membership is 189
[B] All "member countries" of the IMF are members of the United Nations
[C] All member countries of the IMF are not sovereign states
[D] Nauru is the latest member of the IMF
4. The value of Special Drawing Right (SDR) is determined by the basket of __________ currencies.
[A] 4
[B] 5
[C] 6
[D] 7
5. Which of the following currency has largest weightage in the determination of the value of the SDR?
[A] Japanese Yen
[B] Euro
[C] US Dollar
[D] British Pound
6. Which of the following is not the objective of the IMF?
[A] To promote international monetary cooperation
[B] To ensure balanced international trade
[C] To ensure exchange rate stability
[D] To provide loan to private sectors
7. Which of the following statement is NOT correct about the quota at the IMF?
[A] Voting power in the IMF is based on a quota system
[B] USA has highest quota in the IMF
[C] Germany has third highest quota in the IMF
[D] Indian quota in the IMF stands at 2.79% of the total quota.
8. If the Balance of Payment of a country is adverse, then which institution will help that country?
[A] World Bank
[B] World Trade Organization
[C] International Monetary Fund
[D] Asian Development Bank
9. Which of the following currency is not included in the calculation of SDR value?
[A] Yen
[B] Yuan
[C] Rupee
[D] Pound sterling
10. Which of the following is known as the Paper Gold?
[A] US Dollar
[B] Pound
[C] Demand draft
[D] Special Drawing Right
11. What is the role of the IMF?
[A] It controls the budgets of national governments
[B] It acts as a forum for international economics
[C] It observes world exchange rates, balance of payments and multilateral payments
[D] It seeks to promote free international trade
12. What is the IMF’s primary objective?
[A] The overall promotion of world trade
[B] The fixation of the value of world currencies
[C] The promotion of free trade
[D] The promotion of its policies in certain countries around the world
13. How does the IMF meet its primary objective?
[A] By promoting free international trade
[B] By overseeing the balance of payments, acting as a forum of world negotiation and regulating world exchange rates
[C] By acting as an arbitrator for the dispute settlement of world trade matters
[D] By aligning its primary objective with the monetary objectives of national governments
14. IMF was established FOR...
[A] To achieve an orderly conduct of international trade,
[B] Exchange rate stability
[C] To increase the sources of international liquidity
[D] all
15. IMF was established as a result of the Bretton Woods Agreement concluded in 1944. TRUE OR FLASE?
[A] TRUE
[B] FALSE
[C] CANT SAY
[D] PARTLY TRUE
16. Objectives of IMF includes...
[A] To solve the problem of BOP difficulties of the member countries.
[B] To achieve exchange rate stability AND To promote multilateral trade among the member countries.
[C] To remove trade barriers among the member countries.
[D] ALL OF THE ABOVE
17. Any country can become a member of IMF, if,
[A] It is willing to become a member of World Bank. I.e. International Bank for Reconstruction & Development
[B] It is willing to pay subscription.
[C] It is member of UNO
[D] Both A and B
18. The subscription clause of IMF includes….
A] 25% of Subscription Must Be Paid In the Form of Gold of US Dollar, &
[B] 75% Of Subscription Must Be Paid In Terms Of Domestic Currency.
[C] 75% in gold form
[D] Both A and B.
19. Which Measures Are Taken By IMF For Member Countries?
[A] SDR and Quota:
[B] Selling Gold and Borrowings:
[C] Assistance to Member Countries
[D] All
20. Under general review of quota reserve OF IMF has increased from $ _______ billion in 1947 to $ _______ billion in 1988.
[A] 50 to 150
[B] 70 200
[C] 76 to 212
[D] 75 to 250
21. IMF increases its fund by selling Gold to member countries. True or false?
[A] True
[B] False
[C] Partly true
[D] Can’t say
22. IMF borrows from
[A] The Governments of member countries,
[B] General Banks & private institutions of developed countries
[C] OPEC
[D] all of the above
23. What is the full form of OPEC?
[A] Organization of petroleum earning Countries
[B] Organization of product and Exporting Countries
[C] Organization of power Exporting Countries
[D] Organization of petroleum Exporting Countries
24. What are the borrowing limits in IMF?
[A] A member can draw [borrow] upto 25% of its quota, every year. However, such drawing should be repaid within a period of 3 to 5 years.
[B] A member can draw further from the balance quota in four instalments upto 100% of its quota from credit trenched annually
[C] A member can draw [borrow] upto 50 % of its quota, every year. However, such drawing should be repaid within a period of 5 to 10 years.
[D] BOTH A AND B
25. Under the credit tranche, now the members can draw up to _________ of their quota.
[A] 50 %
[B] 150%
[C] 300%
[D] 400%
26. If a member country requires fund, it can purchase foreign exchange from the fund in exchange of its domestic currency. But, in this case, it must repurchase its domestic currency within --------- years.
[A] 3 TO 5
[B] 5 TO 10
[C] 10 TO 12
[D] 3 TO 7
27. If a country does not – repurchase its domestic currency within a fixed period,
[A] IMF cannot force it to repurchase its currencies.
[B] It can charge interest on this amount
[C] It can stop further assistance until repurchase of domestic currency
[D] All of the above
28. Which New Credit Facilities Has Been Started BY IMF IN 1960?
[A] Buffer stock financial facility,
[B] Extended fund facility,
[C] Supplementary financing facility,
[D] All of the above
29. What is the full form of IDA?
[A] Indian Domestic Assistance
[B] Indian Development Assistance
[C] International Development by America
[D] International Development Assistance
SPECIAL DRAWING RIGHTS (SDR) “PAPER GOLD”
1. The post war international monetary system was known as ………….
[A] Currency reserve standard
[B] Currency reserve RATE
[C] Paper Standard
[D] GOLD reserve standard
2. What is The Full Form of SDR?
[A] Special discount rate
[B] Special development reserve
[C] Special drawing rights
[D] Special drawing rate.
3. SDR is also known as……?
[A] gold standard
[B] Paper standard
[C] Paper gold
[D] IMF standard
4. When SDR came into existence (operation)?
[A] January 1970
[B] January 1980
[C] January 1990
[D] January 1985
5. SDRs are regarded as the “international reserves”, which are allocated annually by the collective decisions of participating members in the IMF. True or False?
[A] True
[B] False
[C] Partly false
[D] Partly true
6. What is the main aim of creating the SDR?
[A] To increase the availability of resources of the IMF.
[B] To increase the dollar in world
[C] To give loan to member countries
[D] all of the above
7. SDR is similar to the concept of ___________ which the central bank of the country applies to the commercial banks in the country to supplement the resources of the banking system.
[A] Currency Creation
[B] Credit Creation
[C] Giving Loans
[D] Giving Subsidies
8. On Which Bases SDR should allocated to member counties?
[A] SDR should be allocated to the member countries on the basis of their quotas to IMF
[B] SDR should be allocated to the member countries on the basis of their quotas to World Bank
[C] SDR should be allocated to the member countries on the basis of their quotas to world trade
[D] all of the above
9. When SDR has been created?
[A] SDR is created by the common agreement at the London conference on July 1990
[B] SDR is created by the common agreement at the Bretton wood conference on July 1969.
[C] SDR is created by the common agreement at the American conference on July 1969.
[D] SDR is created by the common agreement at the Paris conference on July 1969
10. SDR is gold paper. It means the value of the SDR is fixed in gold. True or false?
[A] False
[B] True
[C] Partly True
[D] Partly False
11. SDRs are transferable assets under the designation issued by the IMF, subject to certain limits on holding. True or false?
[A] True
[B] False
[C] Partly True
[D] Can’t Say
12. The SDRs serve two purposes…
[A] To serve as a “supplement” to the existing international reserve.
[B] To serve as the Principal reserve asset” of the international monetary system.
[C] To solve deficit bop
[D] Both A and B
13. Till July 1974, the value of SDR was expressed as 1 SDR = _______ Dollar.
[A] 5
[B] 10
[C] 1
[D] 2
14. In Which Year the SDR was delinked from the U.S. dollar and “new scheme” was devised?
[A] 1974
[B] 1985
[C] 1990
[D] 1977
15. Under new scheme value of SDR was expressed in terms of?
[A] “Standard basket of cash”
[B] “Standard base of currencies”
[C] “Standard basket of currencies”
[D] “Standard base of cash”
16. SDR has become a new
[A] International method of payment.
[B] International method of trade.
[C] International money.
[D] International money control system.
17. SDR (paper gold has increased the impotence of yellow metal as an international means of payment. True or false.
[A] True
[B] False
[C] Partly true
[D] Can’t say
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