McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Economics (CBCS) .
Chapters
| 1. |
Which function of foreign exchange market protects against the foreign exchange risk? |
| A. | Credit function |
| B. | Hedging function |
| C. | Transfer function |
| D. | All of them |
| Answer» B. Hedging function | |
| 2. |
Reduction in the value of domestic currency by the government is called |
| A. | depreciation |
| B. | devaluation |
| C. | revaluation |
| D. | appreciation |
| Answer» B. devaluation | |
| 3. |
Reduction in the value of domestic currency through market forces is called |
| A. | depreciation |
| B. | devaluation |
| C. | revaluation |
| D. | appreciation |
| Answer» A. depreciation | |
| 4. |
Increase in the value of domestic currency by the government is called |
| A. | depreciation |
| B. | devaluation |
| C. | revaluation |
| D. | appreciation |
| Answer» C. revaluation | |
| 5. |
What will be the effect on exports if foreign exchange rate increases? |
| A. | Increases |
| B. | Decreases |
| C. | Remains constant |
| D. | None of them |
| Answer» A. Increases | |
| 6. |
Foreign exchange is demanded by.. |
| A. | domestic residents to purchase goods and services from other countries |
| B. | sending gifts and grants to foreign countries (abroad |
| C. | the domestic residents to purchase financial assets in a particular country |
| D. | all of them |
| Answer» D. all of them | |
| 7. |
The supply of foreign exchange comes from.. |
| A. | the foreigners purchasing home country's goods and services through exports |
| B. | the foreigners who invest in home country through joint ventures or through financial market operations |
| C. | currency dealers and speculators. |
| D. | all of them |
| Answer» D. all of them | |
| 8. |
Buyers and sellers of foreign exchange are |
| A. | central banks |
| B. | commercial banks |
| C. | brokers |
| D. | all of them |
| Answer» D. all of them | |
| 9. |
Which exchange rate measures the average relative strength of a given currency with respect to other currencies without eliminating the effect of change in price? |
| A. | Nominal exchange rate |
| B. | Nominal effective exchange rate |
| C. | Real exchange rate |
| D. | Real effective exchange rate |
| Answer» D. Real effective exchange rate | |
| 10. |
When one country manipulates exchange rate against the interest of other country, is known as |
| A. | managed floating |
| B. | dirty floating |
| C. | wide band |
| D. | crawling peg |
| Answer» B. dirty floating | |
| 11. |
Other things remaining the unchanged, when in a country the price of foreign currency rises, national income is: |
| A. | Likely to rise |
| B. | Likely to fall |
| C. | Likely to rise or to fall |
| D. | Not affected |
| Answer» A. Likely to rise | |
| 12. |
Other things remaining the same, when in a country the market price of foreign currency falls, national income is likely |
| A. | to rise |
| B. | to fall |
| C. | to rise or to fall |
| D. | to remain unaffected |
| Answer» B. to fall | |
| 13. |
Devaluation which means fall in value of domestic currency in terms of foreign currency takes place in |
| A. | Flexible Exchange Rate regime |
| B. | Fixed Exchange Rate regime |
| C. | Both (a) and (b |
| D. | Neither |
| Answer» B. Fixed Exchange Rate regime | |
| 14. |
A change from Rs. 60 = 1 dollar to Rs 62 = dollars indicates that Rs has |
| A. | Appreciated |
| B. | Depreciated |
| C. | Neither |
| D. | Either a or b |
| Answer» B. Depreciated | |
| 15. |
The larger fluctuations in portfolio value of foreign exchange of financial institutions leads to |
| A. | greater liquidity of assets |
| B. | greater volatility of rates |
| C. | lesser volatility of rates |
| D. | lesser liquidity of assets |
| Answer» B. greater volatility of rates | |
| 16. |
Other things remaining unchanged, when in a country the price of foreign currency rises, national income is |
| A. | Likely to rise |
| B. | Likely to fall |
| C. | both |
| D. | Not affected |
| Answer» A. Likely to rise | |
| 17. |
Indirect quotation is also known as |
| A. | home currency quotation |
| B. | foreign currency quotation |
| C. | European quotation |
| D. | American quotation |
| Answer» B. foreign currency quotation | |
| 18. |
If rupee is getting depreciated fast and is considered undesirable by the government, the RBI may be advised to |
| A. | Sell dollars in the foreign exchange market |
| B. | Purchase dollars |
| C. | Print more currency notes |
| D. | Raise tariffs on imports |
| Answer» A. Sell dollars in the foreign exchange market | |
| 19. |
If in an effort to control depreciation of rupee the RBI puts more dollars in the supply, it may lead to greater inflation, caused by |
| A. | Increase in money supply in the economy |
| B. | Reduced availability of goods due to increased exports. |
| C. | Reduced availability of goods due to reduced imports |
| D. | All of the above. |
| Answer» D. All of the above. | |
| 20. |
In which of the following items raises the supply of foreign exchange ? |
| A. | Import of goods from China |
| B. | Indian students going to USA for MBA |
| C. | Donation of 50 million $ received from Microsoft |
| D. | Purchase of land in England |
| Answer» C. Donation of 50 million $ received from Microsoft | |
| 21. |
A change from Rs. 140 = 2 £ to Rs. 60 = 1 £ indicates that Rs. is |
| A. | Appreciated |
| B. | Depreciated |
| C. | Neither |
| D. | Either (a) or (b |
| Answer» A. Appreciated | |
| 22. |
Depreciation of domestic currency leads to rise in: |
| A. | Exports |
| B. | Imports |
| C. | Both (a) and (b |
| D. | Neither (a) nor (b |
| Answer» A. Exports | |
| 23. |
Flexible Exchange Rate System is also known as: |
| A. | Pegged Exchange Rate System |
| B. | Dirty Floating |
| C. | Floating Exchange Rate |
| D. | Both (b) and (c |
| Answer» C. Floating Exchange Rate | |
| 24. |
The rate which is determined by the government is known as: |
| A. | flexible |
| B. | fixed |
| C. | floating exchange rate |
| D. | none of these |
| Answer» B. fixed | |
| 25. |
The exchange rate at which demand for foreign currency becomes equal to its supply, is called |
| A. | equal rate of exchange |
| B. | mint parity |
| C. | equilibrium exchange rate |
| D. | all of these |
| Answer» C. equilibrium exchange rate | |
| 26. |
Demand for foreign currency depends upon: |
| A. | repayment of international loans |
| B. | investment in rest of the world |
| C. | direct foreign investment in the domestic economy |
| D. | both (a) and (b |
| Answer» D. both (a) and (b | |
| 27. |
In a flexile exchange rate regime |
| A. | central government control the rate |
| B. | state government control the rate |
| C. | government do not have any intervention |
| D. | central bank control the rate |
| Answer» C. government do not have any intervention | |
| 28. |
Foreign exchange transactions involve monetary transactions |
| A. | among residents of the same country |
| B. | between residents of two countries only |
| C. | between residents of two or more countries |
| D. | among residents of at least three countries |
| Answer» B. between residents of two countries only | |
| 29. |
Paper currency was used for internal use and gold was used for international settlement under standard |
| A. | IMF |
| B. | gold bullion |
| C. | fixed |
| D. | floating |
| Answer» B. gold bullion | |
| 30. |
A foreign currency account maintained by a bank abroad is its |
| A. | nostro account |
| B. | vostro account |
| C. | loro account |
| D. | foreign bank account |
| Answer» A. nostro account | |
| 31. |
The statutory basis for administration of foreign exchange in India is |
| A. | Foreign Exchange Regulation Act, 1973 |
| B. | Conservation of foreign Exchange and Prevention of Smuggling Act. |
| C. | Foreign Exchange Management Act, 1999 |
| D. | Exchange Control Manual |
| Answer» C. Foreign Exchange Management Act, 1999 | |
| 32. |
The market forces influencing the exchange rate are not fully operational under |
| A. | floating exchange rate system |
| B. | speculative attack on the market |
| C. | fixed exchange rate system |
| D. | current regulations of IMF |
| Answer» C. fixed exchange rate system | |
| 33. |
According managed to classification by IMF, the currency system of India falls under |
| A. | Managed flating |
| B. | independently floating |
| C. | crawling peg |
| D. | pegged to basket of currencies |
| Answer» A. Managed flating | |
| 34. |
Under fixed exchange rate system, the currency rate in the market is maintained through |
| A. | official intervention |
| B. | rationing of foreign exchange |
| C. | centralising all foreign exchange operations with central bank of the country |
| D. | none of the above |
| Answer» A. official intervention | |
| 35. |
Euro was launched on |
| A. | 1999 |
| B. | 2000 |
| C. | 2002 |
| D. | 2004 |
| Answer» A. 1999 | |
| 36. |
Indirect rate of exchange is quoted in India for - |
| A. | sale of foreign travellers cheque |
| B. | sale of rupee travellers cheques |
| C. | purchase of personal cheques |
| D. | none of the above |
| Answer» D. none of the above | |
| 37. |
A transaction in which the currencies to be exchanged the next day of the transaction is known as |
| A. | ready transaction |
| B. | value today |
| C. | spot transactions |
| D. | Value tomorrow |
| Answer» D. Value tomorrow | |
| 38. |
The transaction in which the exchange of currencies takes place at a specified future date, subsequent to the spot date is known as a |
| A. | swap transaction |
| B. | forward transaction |
| C. | future transaction |
| D. | non-deliverable forwards |
| Answer» B. forward transaction | |
| 39. |
The buying rate is also known as the |
| A. | bid rate |
| B. | offer rate |
| C. | spread |
| D. | swap |
| Answer» A. bid rate | |
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