Table of Contents
NCERT MCQ ON Balance of Payment:
Q1. Balance of Payments of a country is a statement that records:-
a) Sources of Foreign Exchange
b) Uses of Foreign Exchange
c) Both a) and b)
d) None of the above
Ans:- c)
Explanation:- Balance of Payments is an accounting statement that records the foreign exchange transactions of a country with the rest of the world
Q2. The categories of transactions that are included in current account of Balance of Payments are:-
a) Exports and imports of goods
b) (a) + Exports and Imports of services
c) (b) + Income from and to abroad
d) (c) + Transfers from and to abroad
Ans – d)
Explanation:- Current Account of BoP records 1) export and imports of goods, services, income from and to abroad, unilateral transfers from and to abroad
Q3. Balance of Trade equals:-
a) Exports less imports
b) Exports of goods less imports of goods
c) Exports of services less imports of services
d) None of the aboveShow Answer
Ans – b)
Explanation:- Balance of Trade is the part of Current account of BoP. It is the differnce between Export and Import of physical goods
Q4. The categories of transactions that are included in the capital account of the Balance of Payments are:-
a) Investments from and to abroad
b) Borrowings and lendings from and to abroad
c) Changes in foreign exchange reserves
d) All the above
Ans – d)
Explanation:- Capital account of BoP records the financial transactions of a country in foreign exchange with the rest of the world that changes assets and liabilities status of a country. It includes three transactions. 1) Investments from and to abroad, 2) Borrowings and lendings from and to abroad, 3) Changes in foreign exchange reserves.
Q5. The measurement of Balance of Payments deficit is based on:-
a) Autonomous transactions
b) Accommodating transactions
c) Current account transactions
d) Capital account transactions
Ans – a)
Explanation:- Autonomous transactions are done for profit motive. Such transactions are the main cause of deficit in BoP.
Q6. Choose the correct statement from given below:
a) Balance of trade records the exports and imports of invisible items.
b) A surplus in BoT can rectify the deficit in Bop.
c) Accommodating items are only recorded in the capital account of the BOP.
d) Import of machinery will be recorded in the capital account of BoP.
Ans – c)
Explanation:- Accommodating transactionsa are only recorded in Capital Account. Main motive of such transactions are to settle the surplus and deficit of BoP due to autonomous transactions.
Q7.Choose the correct statement from given below.
a) Balance of Trade is a component of the capital account of Balance of Payments.
b) Floating exchange rate is used to stabilize the price of foreign currency.
c) Increase in the supply of foreign exchange results in a fall in its price
d) Rise in the exchange rate leads to the revaluation of the currency.
Ans – c)
Explanation:- Higher is the supply of foreign exchange, lesser is the foreign exchange rate.
Q8. Current accounts records all payments to rest of the world as_________and all receipts from rest of the world as______
a) Credit, Debit
b) Debit, Credit
c) Debit, Debit
d) Credit, CreditShow Answer
Ans – b)
Explanation:- Foreign exchange inflow is recorded on the credit side. The outflow of foreign exchange is recorded at the debit side of the BoP.
Q9. Balance on invisible trade is equal to
a) Export of goods – Import of goods
b) Export of services – Import of services
c) Import of goods – Export of goods
d) Import of services – Export of goods
Ans – b)
Explanation:- Invisible trade means trade of intangible goods like services
Q10. If value of visible exports is greater than the value of invisible imports, the balance relates to
a) Current account Bop
b) Trade Deficit
c) Capital account BoP
d) Can’t be determinedr
Ans – d)
Explanation:- Only visible exports are compared with visible imports and invisible exports are compared to invisible imports.
Q11. Balance of trade is a__________concept as compared to balance of payments.
a) narrower
b) broader
c) similar
d) None of the above
Ans – a)
Explanation:- Balance of trade is the difference between exports and imports of visible goods. It is just a part of current account
Q12. If trade deficit is ₹ 1500 crores and import of goods are ₹ 3500 crores, value of export of goods will be ₹ 2000 crores?
a) True
b) False
c) Partially true
d) Can’t be predicted
Ans – a)
Explanation:- Trade deficit = Imports of goods – Exports of goods
Q13. Trade deficit refers to the situation where
a) Export of goods is more than the import of goods
b) export of goods is less than the import of goods
c) export of services is more than the import of services
d) export of services is less than the import of services
Ans – b)
Explanation:- When exports of goods is less than the imports of goods. it is the situation of Trade Deficit.
Q14. Uni-lateral transfers are included in
a) current account Bop
b) capital account Bop
c) Both a) and b)
d) None of these
Ans – a)
Explanation:- Unilateral transfers are the part of invisible sections of Current account of BoP.
Q15. An Indian real estate company received rent from google in New York. This transaction would be recorded on____________side of_____________account.
a) credit, current
b) debit, capital
c) credit, capital
d) debit, current
Ans – a)
Explanation:- It is an income out of Investment. It is recorded as income receipts at credit side under invisible trade in current account
Q16. A company located in India receives a loan from a company located abroad. How is this
transaction recorded in India’s Balance of Payments Account?
a) Credit side of current account
b) Debit side of current account
c) Credit side of Capital account
d) Debit side of Capital account
Ans – c)
Explanation:- It is financial transaction and increases the liabilities
Q17. An Indian Company located in India invests in a company located abroad. This transaction is entered in India’s Balance of Payments Account on:-
a) Credit side of current account
b) Debit side of current account
c) Credit side of Capital account
d) Debit side of Capital account
Ans – d)
Explanation:- It is financial transaction and increases the assets of a country in rest of the world and results in outflow of foreign exchange
Q18. Foreign Exchange Transactions which are independent of other transactions in the Balance
of Payments Account are called:
a) Current transactions
b) Capital transactions
c) Autonomous transactions
d) Accommodating transactions
Ans – c)
Explanation:- Autonomous transactions are the transactions that are not influenced by other foreign exchange transactions. For example an Indian company wants to invest in USA rest state market.
Q19. Foreign Exchange Transactions dependent on other Foreign Exchange Transactions are called:
a) Current account transactions
b) Capital account transactions
c) Autonomous transactions
d) Accommodating transactions
Ans – d)
Explanation:- Accommodating transactions are those that are undertaken as a consequence of the autonomous transactions
Q20. Which of the following statements is not true?
a) Borrowings from the Asia Development Bank by the government is an accommodating
transaction.
b) Loans given to Sri Lanka by the government are an accommodating transaction.
c) Buying of machinery from Japan is an accommodating transaction
d) Borrowing from the public is an accommodating transaction.
Ans – c)
Explanation:- Autonomous items refers to those Balance of Payment (BoP0 transactions which are undertaken for profit.
Q21. Who out of the following is included in “Residents” in BoP transactions?
a) Firms
b) Foreign military personnel
c) Government agencies
d) Individuals
Ans – a),c),d)
Explanation:- Here residents means normal residents who has economic interest in the country
Q22. An accounting statement that provides a systematic record of all the economic transactions, between residents of a country and the rest of the world is________
a) Balance of Payments
b) Balance of Trade
c) Government Budget
d) None of these
Ans – a)
Explanation:- BoP is the accounting statement that records the foreign exchange transactions of a country with the rest of the world.
Q23. Balance of Payments is a___________Concept.
a) Stock
b) Flow
c) Both a) and b)
d) Neither a) nor b)
Ans – b)
Explanation:- BoP is prepared for a fiscal (accounting) year for 12 months.
Q24. Inflow of foreign exchange is recorded on the_________side.
a) Credit
b) Debit
c) Either a) or b)
d) Neither a) nor b)
Ans – a),c),d)
Explanation:- Credit side of BoP records the inflow of foreign exchagne.
Q25. When receipts of foreign exchange are more than payments of foreign exchange, BOP is:
a) Balanced
b) Surplus
c) Deficit
d) None of these
Ans – b),c),d)
Explanation:- When receipts of foreign exchange are more than payments. BoP results in surplus.
Q26. Unilateral Transfers are also known as:
a) Bilateral Transfers
b) One-way Transfers
c) Unrequited Transfers
d) Neither a) nor b)
Ans – b)
Explanation:- Unilateral transfers are one way transactions. where one person does not receive anyting in return from another person.
Q27. Balance on ‘Balance of Trade’ can be:
a) Surplus
b) Balanced
c) Deficit
d) Either a) or b) or c)
Ans – d)
Explanation:- Balance of trade is the difference between exports of goods and imports of goods. exports can be more, less and equal to imports of goods
Q28. Which of the following is a component of the Balance of Payment?
a) Current Account
b) Capital Account
c) Nominal Account
d) Real Account
Ans – a),b)
Explanation:-
Q29. Export and import of goods is also known as:
a) Indivisible Trade
b) Visible Trade
c) One-sided Transactions
d) Unrequited transfers
Ans – b)
Explanation:-
Q30. __________refers to the difference between exports and imports of visible items.
a) Balance of Payments
b) Balance of Trade
c) Both a) and b)
d) Neither a) nor b)
Ans – b)
Q31. Autonomous transactions take place on
a) Real Account
b) Capital Account
c) Current Account
d) None of these
Ans – b), c)
Explanation:-
Q32. ____________transactions are undertaken to cover the deficit or surplus in autonomous transactions.
a) current account
b) current account
c) Accommodating
d) None of these
Ans – c)
Explanation:-
Q33. ________is the difference between value of goods sold to the rest of the world and value of goods imported from rest of the world.
a) Balance of Payment
b) Balance of trade
c) Balance of current account
d) Balance of capital account
Ans – b)
Explanation:-
Q34. Gifts and remittances to abroad are recorded on the:
a) Credit side of current Account
b) Debit side of Capital Account
c) Debit side of current Account
d) Credi side of Capital Account
Ans – c)
Q35. Export of the Machinery recorded on the:
a) Debit side of Current Account
b) Credit side of Current Account
c) Credit side of Capital Account
d) Debit side of capital Account
Ans – b)
Q36. Surplus in BoP arises when
a) Autonomous Payments > Autonomous Receipts
b) Accommodating Receipts > Accommodating Payments
c) Accommodating Payments > Accommodating Receipts
d) Autonomous Receipts > Autonomous Payments
Ans – d)
Q37. Balance of Trade is also known as:
a) Balance of Visible Trade
b) Balance of Payments
c) Trade Balance
d) None of these
Ans – a)
Explanation:-
Q38. Import of Machinery is recorded in the_________Account and ‘Borrowings from abroad’ is recorded in the______Account.
a) Current, Capital
b) Capital, Current
c) Capital, Capital
d) Current, Current
Ans – a)
Explanation:-
Q39. Foreign Exchange transactions are dependent on other foreign exchange transactions are called:
a) Current Account Transactions
b) Capital Account Transactions
c) Autonomous Transactions
d) Accommodating Transaction
Ans – d)
Explanation:-
Q40. Foreign Exchange transactions which are independent of other transactions in the Balance of Payments Account are called:
a) Current Transactions
b) Capital Transactions
c) Autonomous Transactions
d) Accommodating Transactions
Ans – c)