Objective Questions

Multiple Choice Questions 4. Current account records all

correct statement from
to rest of the world as paymeni.
1. Choose the
receipts from rest of the worldand alall
.........

given below. as

(a) Balance of trade records the exports and

imports of invisible items.
(a) Credit, debit (b) Debit, credit
(c) Debit, debit (d) Credit, credit
(b) A surplus in B l can rectify the deficit in
BoP.
5. Balance on invisible trade is
(c) Accommodating items are only recorded in equal t
capital account of BoP. (a) Export of goods Import of goods
-

(d) Import of machinery will be recorded in (b) Export of services Import of

servicg
-

capital account of BoP. (c) Import of goods Export of goods

-

(d) Import of services - Export of goods

2. Choose the correct statement from
given below. 6. If value of visible exports is
greater
(a) Balance of Trade is a component of capital than the value of invisible imports, the
account of Balance of Payments. balance relates to
(b) Floating exchange rate is used to stabilise (a) Current account BoP
price of foreign currency. (b) Trade deficit
(c) Increase in the supply of foreign exchange (c) Capital account BoP
rate leads to fall in its price (d) Can't be determined
(d) Rise in exchange rate leads to revaluation
of currency. 7. Balance of trade is a .... .

Concept as
compared to balance of payments.
3. Write the correct sequence of options in (b) broader
(a) narrower
Column Il by matching them with (c) similar (d) None of the ato
options of Column I.
8. If trade deficit is
1,500 crores and
Column I Column I
import of goods are? 3,500 crores,
A. Visible items Items consistingof value of export of goods will be 72.00=
capital receipts and crores.
capital payments (a) True (b) False
B. Invisible (1) All types of (c) Partialy true (d) Can't be predicta
items physical goods
9. Trade deficit refers to the situation
C. Capital ii) All types of
where
transfers services
***
a) export of goods is more than import of
Codes goods.
of
(b export of goods is less than import
A BC goods
(a) (i) (i) (ii) than import
(C) export of services is more
(b) (ii) (ii) 6)
services.
(c) (ii) (i) (i)
(d) (i) (ii) (i) (d export of services is less than import o
services.
 afow
BSE N ew Po
P attern ~ Economics XII (Term 1) 41

ify the correct sequence of Codes

0. Ide
(a) A (i)
alternatives given in Column II by
with terms in (b) B (ii)
matching them respective
Column I. (c) C(il)
(d) D(iv)
ColumnI Column I is not
) Current account 14. Which of the following a
A. External of BoP?
current account
assistance
of BoP component of
(a) Balance of trade
B. Foreign direct () Credit item of
capital account (b) Balance of invisibles
investment
(c) Investment income
of BoP
All of the above are the components of
Debit item of
(d)
C. Export and (i) capital account
Current account

import of
of BoP voice-based services
goods 15. India outsources scale.
and record keeping o n a large
This will be considered
as
Codes
ABC
A BC (a) Export of visible
(b) (i) (ii) (i) merchandise
(a) (i) (ii)
(i) (b) Export of
(d) (ii) (i) (ii) invisibles
(c) (i) (i)
(ii) (c) Export of
transfers are included in (d) Both (b) and (c)
Uni-lateral balance of
11. shows a
BoP 16. If trade deficit
of goods is
account
current
(a) crores and export
account BoP T1,500 of goods
(b) capital (d) None of these value of import
and (b) T5,500 crores,
(c) Both (a)
and will be
of exports is 5,000 crores

12. If value
(a) T6,000 crores
balance of
ofR 3,050 crores, (b) 7 , 0 0 0 crores
import
trade shows (c) 75,00 crores
determined
ofR 1,950 crores
(d) Can't be
(a) Surplus more
exporting goods
crores
Deficit ofT 1,950 India is
(b) 17. Suppose this
(c) Surplus
ofT5,000 c r o r e s
to importing
goods,
ascompared of trade.
3,050 c r o r e s balance
(d) Deficit of F will lead to
. . . .
in
formula
13. Identify the
correct pair of (a) surplus
column I and II.
from the following eoaan*********
(b) deficit
Column I
(c) Either (a)or(b)
ColumnaI
**********e ************************************************************************** above
(d) None of the
A. Current account ) Receipts< be covered by
a
Payments in... can
surplus 18. A deficit while the reverse
i) Receipts> surplus
in........,
B. Current a c c o u n t cannot be done.
Payments
surplus # (a) BoP, BoT
Balance current
(i) Receipts
C. Payments (b) BoT, BoP account
account account, capital
s Current
iv) Receipts (c) account
account current
D. Current account,
Payments (d) capital
deficit (CBSE S Q P 2 0 2 0 - 2 1 )
 CBSE New Pattern Economics Xu
u (Term
42 CBSE

exchânge reserves 25. Transactions which are undertaker

Increase in foreign of capital cover the dis-equilibrium (deficito
19. credit side
r e c o r d e d in 30
are surplus) in balance of payments are
account.
(b) False
called...
(a) True
(d) Can't be predicted (a) autonomous
(c) Partially true
(b) accommodating
domestic interest rate on (c) current account
Increase in
20. leads to surplus in capital (d) None of the above
investment
account.
26. Write the correct pair.
(a) True
3
Column I
(b) False
(c) Partially true
A. Export and
ColumnaI
(d) Can't be
predicted
import of goods ()Accommodating
item
real company receives
estate
B. Foreign i Autonomous
21, An Indian in New York. This
rent from Google recorded o n
exchange item
would be reserve
transaction
account.
side f C. Balance of il Difference
. . . . . . . . .

...

a ) credit, current (c) debit, capital trade between the

(d) debit, current
(b) credit, capital export and
import of visible
the following is/are
22. Which of items
of capital account of
component (s) D. Uni-lateral iv) Factor incomes
BoP? transfers in the form of
direct investment interest, rent, etc
(a) Foreign *************************************************
***********

lMF by the government

(b) Borrowing from
(c) Foreign exchange reserve Codes
(d) All of the above are components of BoP (a) A-i) (b)B-i)
from
(c)C-ii) (d) Div)
23. Choose the incorrect statement
given below. 27. State of balance of payments always
a) Repayment of loan taken from IMF will be balances regardless of the types of
recorded on debit side. transactions.
(b) Surplus in BoP refers to a state where debit (a) True (b) False
side exceeds credit side. d) Can't be predicted
(c) Partially true
c) Increase in investment from rest of the
World decreases the exchange rate. 28. Autonomous items are known as
(d) Devaluation of current items improves below the line items."
trade balance of domestic country.
(a) True (b) False
24. For equilibrium in balance of payments, (c) Partially true (d) Can't be predicted
sum total of account and
......... ...

29. BoP always balance when

account should be zero. as a
a) accommodating, autonomous accommodating items are reflected
(b) current, capital part of capital account of BoP.
c) current, autonomous (a) True (b) False
(d) capital, accommodating (c) Partially true (d) Can't be predicted
B S EN
tow Pattern ~ Economics XIi (Term )
e n v
43

i s the state of balance of payments 36. Which of the following types of deficit
30. Hov
when government is directly is/are common in case of India?
a f f e c t s

involved
in foreign trade? (a) Trade deficit
in BoP improves
(b) Capital account deficit
al Balance (c) Current account deficit
in BoP deteriorates
In) Balance
upon trade balance
(d) Both(a) and (c)
ic) Depends
None of
the above 37. During the outbreak of the second
(d) wave of Covid-19 in the country, India
'surplus refer to
ot payments
Balance received medical equipments from
31. excess o f
which account and
account payment over current
many countries. On
(al Current which side it will be recorded?
account receipts
payment over capital (a) Capital account, credit side
Capital account
/b) account receipts (b) Current account, credit side
Autonomous
payments Over
autonomous (c) Capital account, debit side
side
ic)
receipts
(d) Current account, debit
autonomous
receipts over of
d) Autonomous
38. Autonomous transactions/items
are recorded in
balance of payments
payments

depreciation leads
to a) Current account
Currency
2. on balance of trade. (b) Capital account
improvement
(c) Both (a) and (b)
(a) True
(d) Neither (a) nor (b)
(b) False
of Make in
(c) Partially true 39. What will be the impact India's BoP?
on the
Cant be
predicted India Programme
(d)
of (a) Improve
What will be the likely impact
33. tariff o n balance
of trade (b) Deteriorate

increase in (c) No Change

other things unchanged? Either (a) or (b)
keeping (b) Deteriorate
(d)
( a ImprOve in BoP
(c) Remain c o n s t a n t (d) None of the above 40. Favourable dis-equilibrium
account leads to
in balance of with RBI
state of equilibrium in official reserve
34. At the deficit in either a) Increase
r e s e r v e with
RBI
there will be official
payments, (6) Decrease in with RBI
Deficit in which in official
reserve

of the accounts.
better? (c) No change
c o n s i d e r e d as (b)
account will be
(b) Capital account
(d) Both(a)and
s t a t e m e n t s given
in
(a) Current account
Neither (a) nor (b) From the set of
(d) 41. choose the
Both (a) and (b) Column II.
(c) column I and
to be in
statements.

balance of payments correct pair of

35. For will Column II
which of the following ColumnI
equilibrium, Debit side of
Debit side
* * * * * * * * * * * * * * **
* *
* *** a
* a*n*
h e n s * * * * * * * * * * * * * * * * * * * * * * *

**** ***

software ()
happen current
account equals to
deficit A. Export of
current account

l3) Surplus in
to France i Capital account

in capital account
deficit B. Import of of balance of
account equals to
(b) Surplus in capital machinery from
payments

in current account
China
c) Either (a) or (b)
d) Neither (a) nor (b)
 CBSE New Pattern »

Economics Xu
44 XIl CTerm
ColumnI Column I Alternatives
Debit side of (a) Both Assertion (A)and Reason
C. Remittances to (iii) R)are
curent account correct and Reason (R)is the
relative staying
abroad of balance of explanation of Assertion (A) corred
payments (b) Both Assertion (A) and Reason
(Rla.
correct, but Reason(R) is not the
D. Investment by iv) Credit side of
current acount
explanation of Assertion (A) COrrect
Apple phones (c) Assertion (A) is correct, but
firm in India of balance of
incorrect Reason (Rl
payments
(d) Both Assertion (A)and Reason
(CBSE SQP 2019-20 incorrect
(R) e
Codes
(a) A-i) (b) B-ii) 45. Assertion (A) Purchase of
(c)Cii) (d) D-iv)
from rest of the world is an
Machine
nery
econom
42. 'Charity from Abroad' will be transaction of capital account of Bop
recoreded on ........ side of the Reason (R) Any transaction that
balance of payments accounts. impacts the assets or liabilities of a
(CBSE 2020, Modified) country are recorded on current
(a) debit (b) credit account of BoP.
(c) Either (a) or (b) (d) Not recorded Alternatives
(a) Both Assertion (A) and Reason (R) are
Assertion-Reasoning MCOs correct and Reason (R) is the correct
explanation of Assertion (A)
43. Assertion (A) Accommodating (b) Both Assertion (A)and Reason (R) are
transactions are undertaken to make correct, but Reason (R)is not the correct
equilibrium in BoP account. explanation of Assertion (A)
Reason(R) Accommodating items are (c) Assertion (A) is correct, but Reason (R)is
also called above the line items. incorrect
Alternatives (d) Both Assertion (A) and Reason
incorrect
(R) are
(a) Both Assertion (A) and Reason (R) are
correct and Reason (R) is the correct
46. Assertion (A) A
explanation of Assertion (A) country always triest
(b) Both Assertion (A) and Reason (R) are balance the BoP, i,e. balance in current
account equals to balance in
correct, but Reason (R) is not the correct capital
explanation of Assertion (A) account.
c) Assertion(A) is correct, but Reason (R) is Reason (R) Balanced BoP indicates
incorrect stable economic relation with rest of th
(d) Both Assertion (A) and Reason (R) are world.
incorrect
Alternatives
44. Assertion (A) Balance of Payments is (a) Both Assertion (A) and Reason (R) are true
the and Reason (R) is the correct explanation o
accounting record of economic
transactions only. Assertion (A)
Reason (R) Surplus balance of (b) Both Assertion (A) and Reason (R) are true
but Reason(R)is not the correct
payments is an indicator of excess of
outflows over inflows of explanation of Assertion (A)
foreign trade. (c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R)IS tr
 lconomics XII (Term ) 45
New Pattern
~

of balance of Alternatives
47.
ion
A s s e r t i o n
(A) Capital (a) Assertion(A)is true and Reason (P) is a
payment is non recurring in nature.
correct reason of Assertion (A)
transfers affects the
Capital
Reason (R)lhabilities (b) Assertion (A) is true but Peason (P) is not a

and of a country. correct reason of As5ertion(A)

assets
Alternatives
(c) Assertion(A) is false, Reason (P) is true

and (R)Reason are true (d) Both are false

(a) Both Assertion{A)the correct explanation of
and Reason(R)is
Assertion (A). 50. Balance of payments in general, records
and Reason (R) are true, all transactions between resident of
(b) Both Assertion(A)not
but Reason(R)is
the correct
home country and....
Assertion (A).
explanation of (a) non-residents of home country
is false.
(A) is true, but Reason (R) (b) citizens of rest of the world
(c) Assertion is true.
(A) is false, but Reason (R) (c) residents of the rest of
the world
d) Assertion
(d) All of the above
Case Based MCOs
correct statement from
following case study 51. Choose the
Read the
Direction given below.
questions 48 to 52 on the
National income and BoP
are directly
and answer (a)
the same.
basis of related
to
of payments are

National income and balance (b) BoP transactions help government

In reserve

important
macroeconomic variables.
maintain foreign exchange
wo income is (c) Both (a) and (b) are true
model, national
economic
an open
of all the sectors of (d) Both are false
of expenditures
sum total
GDP is probably the
most be recorded on
an economy. 52. Foreign investment will
and closely monitored account of BoP?
widely reported which of the following
aggregate statistic. (b) Capital account
(a) Current account
of the size of an economy. (c) Both (a) and (b) (d) Not recorded in BoP
GDP is a measure
total amount of 'stuff the
It tells us the
change in the
Any Direction Read the following case study.
economy produces. the
leads to change and questions 53 to 57 on
demand for domestic goods
answer

in national income
of the country. Also, basis of the same.
rate affects India's BoP was
changes in foreign exchange The growing strength of
since the
between countries. observed in the post reform period,
trading relation in 2005-2006. This
of crisis of 1991 continued
48. What will be the likely impact trade? inspite of a widening
growing strength
was
balance of
increase in exports on
current account deficit to the tune of US
(b) Deteriorate
(a) Improve to 1.1 per
(d) Can't be predicted dollar 9.2 million that is equivalent
(c) No change 2005-2006. Rising foreign
cent of GDP in
Improvement in balance with a sharp revival of
49. Assertion (A) investment, together amaintained
of payments has an incremental impact inflows of non-resident deposits,
of a period. account vis-à-vis
onthe national income strong balance in the capital
of foreign exchange Given such robust,
Reason (R) Inflow high level of reserves.
is by caused of RBI had deemed it
in the domestic country external position
around the the issue of full capital
rate of returns opportune to revisit
changing
account convertibility.
globe.
 46 CBSE New Pattern ~

Economics XIT
e e en enee
XII (CTerm
In this
scenario, Indian companies hand 55. transaction of BoP is
carried
.........

holdings with international agencies (taxing the central bank to

loans and equity partnership) plans to make bring equilibrium
(a) Autonomous
huge investments in retails and infrastructure.
(b) Accommodating
Also, many companies are boosting up their (c) Both (a) and (b) (d) Neither(a) nor(b
foreign country operations. They are less
perturbed about the rising inflation rate or the 56. Assertion (A) Post the economic
other tight money measures adopted reforms of 1991, India's BoP has
by
the
government. This could be due to favourable improved many folds.
consolidation exposure and the opportunity in Reason (R) Devaluation of
currency
covering their risk in currency future market. during the new economic reformns
improved the exports surplus of the
53. Current account of BoP records which
of the following transactions?
country.
Alternatives
(a) Transactions which are done for profit (a) Assertion (A) is true and Reason(R) is a
motive correct reason of Assertion (A)
(b) Transactions which have no impact on the (b) Assertion (A) is true and Reason (R) is no
capital reserve of the country correct reason of Assertion (A)
(c) Transactions which bring BoP in the state (c) Assertion (A) is false, Reason (R) is true
of equilibrium (d) Both are false
(d) Both (a) and (b)
57. Indian companies coming in
54. If government increase tariff on collaboration with foreign compan
of goods, how it will
import
impact the state of will lead to a/an ........ for foreig
BoP? exchange reserve.
(a) This will lead to inflow of foreign exchange (a) increase
(b) This will lead to outflow of foreign (b) decrease
exchange
(c) There will be no impact on the state of BoP (c) no change
(d) Can't be predicted (d) Either (a) or (b)