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Economics: CUET Mock Test - 3


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40 Questions MCQ Test CUET Mock Test Series | Economics: CUET Mock Test - 3

Economics: CUET Mock Test - 3 for Class 12 2023 is part of CUET Mock Test Series preparation. The Economics: CUET Mock Test - 3 questions and answers have been prepared according to the Class 12 exam syllabus.The Economics: CUET Mock Test - 3 MCQs are made for Class 12 2023 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Economics: CUET Mock Test - 3 below.
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Economics: CUET Mock Test - 3 - Question 1

The term foreign exchange means

Detailed Solution for Economics: CUET Mock Test - 3 - Question 1

Foreign exchange refers to the stock of foreign currencies required to trade between countries.

Economics: CUET Mock Test - 3 - Question 2

The gold standard system of exchange rate lost its importance during

Detailed Solution for Economics: CUET Mock Test - 3 - Question 2

Gold standard start to loose its importance during 1920s, post the world war and rising prices of gold around the globe.

Economics: CUET Mock Test - 3 - Question 3

Which of the following countries still follows fixed exchange rate system?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 3

There are very few countries in the world which still follows fixed exchange rate system including Fiji, Kuwait, Morocco, and Libya,

Economics: CUET Mock Test - 3 - Question 4

The ________ expresses the ratio of exchange between the currencies of two countries.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 4

Foreign exchange rate is the rate at which one unit of foreign currency is exchanged for some units of domestic currency.

Economics: CUET Mock Test - 3 - Question 5

Devaluation of currency is a component of _______ exchange rate system.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 5

Devaluation refers to the decrease in the value of domestic currency as planned by the government under fixed exchange rate.

Economics: CUET Mock Test - 3 - Question 6

What will be the most likely impact on the national income when in a country the price of foreign currency rises, keeping other things unchanged?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 6

ise in exchange rate leads to depreciation of domestic currency. Depreciation of currency encourages exports and inflow of foreign exchange. This process is likely to have a positive impact on the national income of the country.

Economics: CUET Mock Test - 3 - Question 7

Before the Bretton Woods standard system, exchange rates were pegged against ______

Detailed Solution for Economics: CUET Mock Test - 3 - Question 7

Before the Bretton Woods standard, gold standard was followed. Under that system of exchange, rates were fixed or tied against US Dollar.

Economics: CUET Mock Test - 3 - Question 8

Suppose the government plans to reduce the prices of US Dollar from ₹ 50 to ₹ 45. This step is known as ............ of domestic currency.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 8

This is a deliberate step taken by the government to rise the value of domestic currency. This is known a revaluation of domestic currency against foreign currency.

Economics: CUET Mock Test - 3 - Question 9

The fixed exchange rate is determined by the Reserve Bank of India.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 9

The fixed exchange rate is determined by the government of the country.

Economics: CUET Mock Test - 3 - Question 10

Increase in the value of domestic commodities in terms of foreign currency is known as

Detailed Solution for Economics: CUET Mock Test - 3 - Question 10

When the value of domestic commodity increases, it indicates increase in the value of domestic currency. This situation could either be appreciation or revaluation depending upon the type of exchange rate.

Economics: CUET Mock Test - 3 - Question 11

Relationship between demand for foreign exchange and foreign exchange rate is

Detailed Solution for Economics: CUET Mock Test - 3 - Question 11

Demand for foreign exchange and foreign exchange rate is indirect or inverse i.e., when foreign exchange rate increase, its demand falls.

Economics: CUET Mock Test - 3 - Question 12

A downward movement along the demand curve for foreign exchange indicates

Detailed Solution for Economics: CUET Mock Test - 3 - Question 12

A downward movement along demand curve is caused by fall in exchange rate, which represents appreciation of domestic currency.

Economics: CUET Mock Test - 3 - Question 13

he US $ exchange rate for rupee is ₹ 75 now, as compared to ₹ 63 previously. This shows that the value of rupee has

Detailed Solution for Economics: CUET Mock Test - 3 - Question 13

Price of US Dollar rose from ₹ 63 per unit to ₹ 75 per unit, this shows that the value of domestic currency has fallen over the time period due to market forces. This is known as depreciation of domestic currency.

Economics: CUET Mock Test - 3 - Question 14

Currency appreciation depicts a situation when domestic currency gains its value in relation to a foreign currency.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 14

Rising in the value of domestic currency in the foreign exchange market is known as currency appreciation,

Economics: CUET Mock Test - 3 - Question 15

Under managed floating exchange rate system, central bank determines the exchange rate and excessive fluctuation is checked by the market forces.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 15

Under managed floating exchange rate system, market forces determine the exchange rate and excessive fluctuation is checked by the central bank.

Economics: CUET Mock Test - 3 - Question 16

If ₹ 75 are required to buy 1$, instead of ₹ 78 per US Dollar, this situation is indicating that

Detailed Solution for Economics: CUET Mock Test - 3 - Question 16

As less units of domestic currency are required to exchange one unit of foreign currency, this situation refers to appreciation of domestic currency.

Economics: CUET Mock Test - 3 - Question 17

Clean floating exchange rate is determined at a point where

Detailed Solution for Economics: CUET Mock Test - 3 - Question 17

Floating exchange rate is determined by the market forces of demand and supply. Like a general price determination, exchange rate is determined at a point where demand and supply are equal.

Economics: CUET Mock Test - 3 - Question 18

It has been observed in recent times that Indian currency is depreciating against US Dollar. Which of the following reason can be accounted for the same?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 18

There are many reasons that can be accounted for depreciation of Indian currency against UD Dollar, few of such reasons are listed in options.

Economics: CUET Mock Test - 3 - Question 19

Assertion (A): Demand for foreign exchange and exchange rate moves in the same direction.
Reason (R):  When exchange rate rises domestic goods becomes cheaper in international market.
Alternatives

Detailed Solution for Economics: CUET Mock Test - 3 - Question 19

Demand for foreign exchange and exchange rate are inversely proportional, i.e., with increase in one other fall and vice-versa.

Economics: CUET Mock Test - 3 - Question 20

Assertion (A): Manage floating exchange rate system is a hybrid system of exchange rate used by the most of the countries in recent time.
Reason (R): Excessive fluctuation in exchange rate system is checked by the central authority under dirty floating exchange rate.
Alternatives

Detailed Solution for Economics: CUET Mock Test - 3 - Question 20

Under managed floating exchange rate, price is determined by the market forces however, excessive fluctuation is checked by the central bank. Thus, this system has components of both fixed and floating exchange rate system and known as dirty floating exchange rate.

Economics: CUET Mock Test - 3 - Question 21

Choose the correct statement from given below.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 21

Accommodating transactions are undertaken for balancing the BoP, thus these are only recorded in capital account of BoP.

Economics: CUET Mock Test - 3 - Question 22

Balance on invisible trade is equal to

Detailed Solution for Economics: CUET Mock Test - 3 - Question 22

Invisible items are the services. Balance on invisible items is calculated as the difference between exports and imports of services.

Economics: CUET Mock Test - 3 - Question 23

Balance of trade is a _______ concept as compared to balance of payments.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 23

Balance of trade only includes export and import of goods while balance of payments includes all international concepts. So, BoT is a narrower concept as compared to BoP.

Economics: CUET Mock Test - 3 - Question 24

Trade deficit refers to the situation where

Detailed Solution for Economics: CUET Mock Test - 3 - Question 24

Trade deficit and balance of trade deficit are one or the same thing, it is the situation where import of goods exceeds the export of goods during a given period of time.

Economics: CUET Mock Test - 3 - Question 25

Uni-lateral transfers are included in

Detailed Solution for Economics: CUET Mock Test - 3 - Question 25

Uni lateral transfers are one way transactions which have no impact on the assets or liabilities of the country, thus recorded in the current account of BoP.

Economics: CUET Mock Test - 3 - Question 26

India outsources voice-based services and record keeping on a large scale. This will be considered as

Detailed Solution for Economics: CUET Mock Test - 3 - Question 26

The given are the examples of export of services, thus considered as invisible trade and recorded in current account of BoP.

Economics: CUET Mock Test - 3 - Question 27

Suppose India is exporting goods more as compared to importing goods, this will lead to _______ in balance of trade.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 27

Export of goods leads to inflow of foreign exchange while import leads to outflow. In the given situation, as the inflows are greater than outflow, it leads to surplus in BoT.

Economics: CUET Mock Test - 3 - Question 28

Increase in foreign exchange reserves are recorded in credit side of capital account.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 28

Foreign exchange reserves are considered as an asset for the economy and increase in assets are always debited as per accounting rule. So, increase in foreign exchange reserve will be recorded on debit side of capital account.

Economics: CUET Mock Test - 3 - Question 29

An Indian real estate company receives rent from Google in New York. This transaction would be recorded on _____ side of ______ account.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 29

As the rent is received, so, it is an inflow of currency and considered as a credit item. Also, rent does not impact the assets or liabilities of the country thus, it is recorded in current account of BoP.

Economics: CUET Mock Test - 3 - Question 30

Choose the incorrect statement from given below.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 30

Surplus is the situation of excess of receipts over expenditures. In BoP, it happens when the balance of credit side exceeds the balance of debit side.

Economics: CUET Mock Test - 3 - Question 31

Transactions which are undertaken to cover the dis-equilibrium (deficit or surplus) in balance of payments are called _____

Detailed Solution for Economics: CUET Mock Test - 3 - Question 31

Accommodating transactions are only undertaken when there is a deficit in BoP. Thus, these are known as below the line items.

Economics: CUET Mock Test - 3 - Question 32

State of balance of payments always balances regardless of the types of transactions.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 32

State of BoP need not always balances as different account of BoP (Current account and Capital account) might have different balance.

Economics: CUET Mock Test - 3 - Question 33

BoP always balance when accommodating items are reflected as a part of capital account of BoP.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 33

Accommodating transactions are balancing transactions, so, when these are included, BoP always balances.

Economics: CUET Mock Test - 3 - Question 34

Balance of payments ‘surplus refer to excess of

Detailed Solution for Economics: CUET Mock Test - 3 - Question 34

Surplus in BoP is a state where receipts on account of autonomous items exceeds over autonomous payment as these are independent of BoP.

Economics: CUET Mock Test - 3 - Question 35

What will be the likely impact of increase in tariff on balance of trade keeping other things unchanged?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 35

A tariff is a tax on import, which makes imports expensive in the domestic market.
The rise in tariff keeping exports unchanged, will likely to have a positive impact on BoT.

Economics: CUET Mock Test - 3 - Question 36

For balance of payments to be in equilibrium, which of the following will happen?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 36

In order to attain equilibrium in BoP, there will be deficit in one account and surplus in the other of equivalent amount.

Economics: CUET Mock Test - 3 - Question 37

During the outbreak of the second wave of Covid-19 in the country, India received medical equipments from many countries. On which account and which side it will be recorded?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 37

The given is an example of uni lateral transfers received. So, it will be recorded on the credit side of current account of BoP.

Economics: CUET Mock Test - 3 - Question 38

What will be the impact of Make in India Programme on the India’s BoP?

Detailed Solution for Economics: CUET Mock Test - 3 - Question 38

The given programme attracts foreign investment in India, this will lead to inflow of foreign currency, hence improving the state of BoP for the country.

Economics: CUET Mock Test - 3 - Question 39

Assertion (A): Accommodating transactions are undertaken to make equilibrium in BoP account.
Reason (R): Accommodating items are also called above the line items.
Alternatives

Detailed Solution for Economics: CUET Mock Test - 3 - Question 39

Accommodating transactions are balancing transactions of BoP, so these are called as below the line items.

Economics: CUET Mock Test - 3 - Question 40

Assertion (A): Purchase of Machinery from rest of the world is an economic transaction of capital account of BoP.
Reason (R): Any transaction that impacts the assets or liabilities of a country are recorded on current account of BoP.
Alternatives

Detailed Solution for Economics: CUET Mock Test - 3 - Question 40

Purchase of machinery will be recorded in current account of BoP as it is considered as an import of goods. Whereas transaction that has an impact on the assets or liabilities of the country is recorded in capital account of BoP.

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