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Test: Open Economy Macroeconomics - 1


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10 Questions MCQ Test Indian Economy for UPSC CSE | Test: Open Economy Macroeconomics - 1

Test: Open Economy Macroeconomics - 1 for UPSC 2022 is part of Indian Economy for UPSC CSE preparation. The Test: Open Economy Macroeconomics - 1 questions and answers have been prepared according to the UPSC exam syllabus.The Test: Open Economy Macroeconomics - 1 MCQs are made for UPSC 2022 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Open Economy Macroeconomics - 1 below.
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Test: Open Economy Macroeconomics - 1 - Question 1

The foreign exchange rate of a country is the

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Exchange rates are defined as the price of one country's currency in relation to another country's currency.

Test: Open Economy Macroeconomics - 1 - Question 2

A source of supply of foreign exchange is

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The supply of foreign exchange comes through exports of goods and services.

Test: Open Economy Macroeconomics - 1 - Question 3

Foreign exchange means

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Foreign exchange is an institution or system for dealing with the currencies of other countries.

Test: Open Economy Macroeconomics - 1 - Question 4

Balance of payment Accounts is a

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The balance of payments (BOP) is the method by which countries measure all of the international monetary transactions within a certain period.

Test: Open Economy Macroeconomics - 1 - Question 5

A source of demand for foreign exchange is

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The source of demand for foreign exchange is Imports of goods and services from the rest of the world.

Test: Open Economy Macroeconomics - 1 - Question 6

A deficit in balance of trade indicates

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A trade deficit is an economic measure of international trade in which a country's imports exceeds its exports. A trade deficit represents an outflow of domestic currency to foreign markets. It is also referred to as a negative balance of trade (BOT).
Trade Deficit = Total Value of Imports – Total Value of Exports

Test: Open Economy Macroeconomics - 1 - Question 7

Fixed exchange rate is

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A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen).

Test: Open Economy Macroeconomics - 1 - Question 8

Flexible exchange rate is

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The flexible rate of exchange is the rate that is determined by the supply-demand forces in the foreign exchange market

Test: Open Economy Macroeconomics - 1 - Question 9

Flexible exchange rate is determined by

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The Flexible exchange rates can be defined as exchange rates determined by global supply and demand of currency. In other words, they are prices of foreign exchange determined by the market, that can rapidly change due to supply and demand, and are not pegged nor controlled by central banks.

Test: Open Economy Macroeconomics - 1 - Question 10

Point out a merit of fixed exchange rate

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Prevents Speculation in foreign exchange market: Another important merit of fixed exchange rate system is that it does away with speculation in foreign exchange markets. The advocates of fixed exchange rate system points out that the flexible and unstable exchange rate encourages speculation in foreign exchange market.

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