Economics: CUET Mock Test - 4 - Commerce MCQ

The curve depicting the supply of foreign exchange i s ________ sloped.

Demand for foreign exchange is directly related to the price of foreign exchange.

Devaluation and depreciation of currency are one or the same thing.

The market where foreign currencies are traded is known as

Indian government initiated many schemes to attract foreign investment, which of the following statement is correct from below

Due to appreciation of domestic currency, supply curve of foreign exchange will

Flexible exchange rate is determined by the supply and demand of foreign exchange in the international market.

Appreciation of foreign currency leads to increase in exports from the domestic country.

Occasional intervention by central bank to influence price of foreign exchange is known as .............

Choose the correct statement from given below

The form of exchange market in which delivery of currency happens on the same day is known as

Assertion (A): Make in India campaign initiated by the government leads to rise in foreign exchange rate.
Resason (R): Inflow of foreign exchange improves the trade deficit of the country.
Alternatives

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

Directions: Read the following case study and answer the questions.
Indian’s exchange rate policy has evolved in line with international and domestic developments. Post-independence, in view of the prevailing Bretton Woods system, the Indian rupee was pegged to the Pound sterling. With the breakdown of the Bretton Woods system, and also the declining share of UK in India’s trade, the rupee was delinked from the Pound sterling in September, 1975. During the period between 1975 to 1992, the exchange rate was officially determined by the RBI within nominal band of plus or minus 5 percent of the weighted basket of currencies of India’s major trading partners. This exchange rate was referred to as ‘adjustable nominal peg with a band’.

Q. Post-independence, the exchange rate was determined under

Directions: Read the following case study and answer the questions.
Indian’s exchange rate policy has evolved in line with international and domestic developments. Post-independence, in view of the prevailing Bretton Woods system, the Indian rupee was pegged to the Pound sterling. With the breakdown of the Bretton Woods system, and also the declining share of UK in India’s trade, the rupee was delinked from the Pound sterling in September, 1975. During the period between 1975 to 1992, the exchange rate was officially determined by the RBI within nominal band of plus or minus 5 percent of the weighted basket of currencies of India’s major trading partners. This exchange rate was referred to as ‘adjustable nominal peg with a band’.

Q. Immediately after independence, Indian rupee was pegged to the ______

Directions: Read the following case study and answer the questions.
Indian’s exchange rate policy has evolved in line with international and domestic developments. Post-independence, in view of the prevailing Bretton Woods system, the Indian rupee was pegged to the Pound sterling. With the breakdown of the Bretton Woods system, and also the declining share of UK in India’s trade, the rupee was delinked from the Pound sterling in September, 1975. During the period between 1975 to 1992, the exchange rate was officially determined by the RBI within nominal band of plus or minus 5 percent of the weighted basket of currencies of India’s major trading partners. This exchange rate was referred to as ‘adjustable nominal peg with a band’.

Q. The rupee was delinked from Pound sterling in 1975 because

Directions: Read the following case study and answer the questions.
Indian’s exchange rate policy has evolved in line with international and domestic developments. Post-independence, in view of the prevailing Bretton Woods system, the Indian rupee was pegged to the Pound sterling. With the breakdown of the Bretton Woods system, and also the declining share of UK in India’s trade, the rupee was delinked from the Pound sterling in September, 1975. During the period between 1975 to 1992, the exchange rate was officially determined by the RBI within nominal band of plus or minus 5 percent of the weighted basket of currencies of India’s major trading partners. This exchange rate was referred to as ‘adjustable nominal peg with a band’.

Q. Indian currency was delinked from pound sterling on

Directions: Read the following case study and answer the questions 51 to 55.
In the Indian context, the RBI Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. RBI acts as the chief monetary authority and the custodian of foreign exchange assets. RBI accumulates foreign currency reserves by purchasing from authorised dealers in the open market operations. The type of instruments in which RBI can invest is stipulated in the RBI Act. The aid received by the government also becomes a part of the reserves.
The Asian crisis tells us how countries suffer due to ill management of the foreign exchange reserves. Many countries foresaw
the vulnerability to the external shocks and accumulated heavy foreign exchange reserves. Countries want to keep their exports competitive. Hence, they prefer to depreciate their currencies against dollars. In recent days, there has been a continuous appreciation of rupee vis-a-vis dollar. To avoid the appreciation of rupee, RBI has been continuously interfering in the money market. RBI is buying dollars from the market. The dollars that are being bought add to the foreign exchange kitty.
Unlike, in the past, the NRI community is more dispersed now, not just confining to the Gulf. Due to software boom, Indians are heading towards new destinations. NRIs are doing well there and ploughing back their savings to India. Moreover, foreign institutional investors are also making huge investments into Indian stocks.
The emergence of India as an offshore outsourcing hub has created new opportunities. There are huge dollar earnings for India. Further, India is also proving to be a worthy manufacturing hub for many companies. All these factors played a positive role in building up of huge foreign exchange reserves.

Q. During the economic crisis of 1990s, India opted for which of the following foreign exchange measure?

Choose the correct statement from given below.

Current account records all payments to rest of the world as ______ and all receipts from rest of the world as _____

If value of visible exports is greater than the value of invisible imports, the balance relates to

If trade deficit is ₹ 1,500 crores and import of goods are ₹ 3,500 crores, value of export of goods will be ₹ 2,000 crores.

If value of exports is ₹ 5,000 crores and import of ₹ 3,050 crores, balance of trade shows

Which of the following is not a component of current account of BoP?

If trade deficit shows a balance of ₹ (-) 1,500 crores and export of goods is ₹ 5,500 crores, value of import of goods will be

A deficit in _______ can be covered by a surplus in _______ , while the reverse cannot be done.

Increase in domestic interest rate on investment leads to surplus in capital account.