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Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Commerce MCQ


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8 Questions MCQ Test - Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions

Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions for Commerce 2024 is part of Commerce preparation. The Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions questions and answers have been prepared according to the Commerce exam syllabus.The Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions below.
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Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 1
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Autonomous items cause movements of goods and services across the borders.

Reason (R): Accommodating items to clear the deficit or surplus in the Balance of Payment.

Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 1
Autonomous items refers to those Balance of Payment (BOP) transactions which are undertaken for profit.
Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 2
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Import of machinery is reflected in the current account of balance of payments.

Reason (R): Export and import of goods and invisibles are recorded in the current account of balance of payments.

Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 2
Export and import of all goods including machines are recorded in the current account.

Note: There is a third category (besides current account and capital account) called official reserve account which records transactions of the central bank in a BOP statement. These transactions are called accommodating or ‘beloiv the line’ transactions. It relates to running down its reserves of foreign exchange by selling foreign currency in foreign exchange market in case of a deficit. The decrease (or increase) in official reserves is called the overall balance of payments deficit (or surplus).

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Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 3
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Current account is a part of Balance of Trade.

Reason (R): Current account records exports and imports of goods and services and transfer payments.

Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 3
Balance of Trade is a part of the current account.

Balance on Current Account=Trade balance + Invisibles balance

Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 4
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): The level of aggregate demand tends to rise.

Reason (R): Exports are more than imports.
Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 4
Aggregate demand is based on four components. These are: consumption, investment, government spending and net exports. Exports lead to a rise in AD.
Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 5
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): In case of currency appreciation, less rupees are to be paid to buy one US dollar.

Reason (R): Currency appreciation leads to increase in value of domestic currency in reference to foreign currency. So, less is needed to pay for the same amount.
Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 5
Export of goods and services from India to the US would mean inflow of foreign exchange to India.
Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 6
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Export of goods and services from India to the US would mean outflow of foreign exchange from India.

Reason (R): Foreign exchange in terms of receipts for exports flows from the US to India.
Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 6
Export of goods and services from India to the US would mean inflow of foreign exchange to India.
Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 7
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): In order to restore the value of depreciating domestic currency, the Central Bank sells the US dollars in the international money market.

Reason (R): By selling US dollars, the supply of dollars will increase which will reduce the price of dollars.
Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 7
Increases in real GDP in the United States will increase the supply of dollars to foreign countries, causing the dollar to depreciate.
Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 8
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): When in order to buy 1 US dollar ₹ 80 are needed instead of ₹ 75, domestic currency shows depreciation.

Reason (R) : Depreciation of domestic currency refers to fall in the value of domestic currency in terms of foreign currency caused by rise in foreign exchange rate in the foreign exchange market.
Detailed Solution for Test: Open Economy Macrcoeconomics- Assertion and Reason Type Questions - Question 8
Here, domestic currency shows depreciation because more rupees are to be paid to buy one US dollar.
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