VISIONARY COMMERCE ACADEMY

Business Economics

Semester VI - Question Bank

Sr.N Question Answer 1 Answer 2 Answer 3 Answer 4 Correct

o. Answer
Module I

1 Recardian comparative cost More than two Only two Only to developed Four Answer1
theory can be extended or applied commodities countries countries Countries
to

2 The classical theory of David Ricardo Heckscher G V Haberler Alfred Answer1

VCA
international trade was given by Marshal
___.

3 Which of the following is Trade between Trade between Trade between Only to Answer3
international trade: provinces regions countries developed
countries

4 Under __ type of cost difference Absolute cost Comparative Equal Different Answer3
international trade will not take
place

5 David Ricardo explained his USA and England and USA and India USA and Answer2
comparative cost difference England Portugal China
theory,taking
6 The cause for international trade Social Factor Social Public Answer2
is__________ security endowments contribution revenue

7 Modern theory of international Trade between Free Trade Labour- intensive Trade of Answer2
trade is based on the assumption many countries production in all goods and
of ______. the countries services

8 The main cause of international Social Differences in Conditions of Demand for Answer2
trade according to Modern theory contribution relative supply of commodities
is______. commodity commodity

VC A
prices

9 Accorging to Modern theory Difference in Productive Comparative cost Money cost 1

relative factor prices in two factor efficiency of conditions differences
countries are determined by____. endowments labour

10 H.O. Theory explain _______ Inter-regional International Only to developed Both Inter- Answer4
trade trade countries trade regional &
International
trade
11 Double factoral terms of trade Px and Pm Zx and Zm Ux and Um Rx and Rm Answer2
states productivities of export and
import sectors as:
12 The offer curves are based Individual Aggregate Reciprocal Internal Answer3
on_______ Demand Demand Demand Demand

13 According to H.O theory , Money cost Comparative Productive Difference in Answer4

product price depends on differences cost efficiency of factor
conditions labour endowments

14 The Ricardian theory states that Perfectly Less mobile Perfectly immobile Less Answer1
the factor resources within the mobile immobile
country are:

15 One of the assumptions of the Increasing cost Diminishing Constant cost No Cost Answer3
Ricardian theory of international cost

16
trade is:

The favourable gross terms of Qm>Qx Qm<Qx

VCA Qm=Qx Qm ≠ Qx Answer1
trade is enjoyed when:

17 The Ricardian theory states that Perfectly Perfectly Less mobile Less Answer2
the factor resources between mobile immobile immobile
countries are:

18 Ricardian theory proves that both Incur losses Mutually Wage war Declare Answer2
trading partners: gains insolvency
19 The ratio of Double Factoral Pm/Px X Px/Pm X Pm/Zx X Zm/Px Px/Pm X Zm Answer2
Terms of Trade is derived as: Zx/Zm Zx/Zm

20 The offer curves are explained by: Alfred Pigou and Say Keynes and Philip and Answer1
Marshall and Sweezy Taussig
Edgeworth

21 The concept of offer curvesto J.M Keynes Marshall - J. S Mill David Answer2

VC A
explain the gains from trade was Edgeworth Ricardo
introduced by ________.

22 Commodity X is capital intensive Capital/Labour Phisical units X requires better Capital/Labou Answer1
if its production (K/L) ratio is of K and L are technology than Y r (K/L) ratio
greater than Y greater than Y is less than Y

23 An offer curve differs from an usual An usual Both usual Investment Answer3
demand curve supply curve demand & supply curves
only only curves

24 According to H. O. Theory the labour Difference in Better technology Diffrence law Answer2
international trade takes place due efficiency product price
to the difference in

25 The classical theory of Adam Smith Alfred John Stuat Mill, John Maynard Answer3
international trade was further Marshall Cairnes & Keynes
develoved and refined by Bastable
26 According to Hecksher, different Factor Factor quality Factor production Factor Answer1
countries are endowed with intensity durability
different:

27 An offer curve is a graphical Export price Import Price To start Vaious Answer4
representation of recoprocal international trade quantities of
demand indicating Export &
____________. Import

28 The Single Factoral Terms of Jacob Viner Taussig Dorrance Gerald Mier Answer1
Trade is defined by:
VCA
29 Assumption of reciprocal demand Three Two countries Four countries Five countries Answer2
is between __________ countries

30 The following of primitive Favourable Unfavourable Same Flexible Answer2

technologies result in ________
Terms of Trade:

31 The gain from trade is maximum Nearer to the Nearer to the Equal to the Unequal to Answer2
if the international terms of trade domestic terms internal terms exporting country the domestic
are of trade of the of trade of country
importing trading partner
country
32 The Commodity Terms of Trade Px/Pm Pm/Px Qm/Qx Pm/Qm Answer1
derives a ratio as:

33 International trade increases the Exporting Importing All the countries Only Answer3
economic welfare of country country developed
____________. countries

34 Terms of trade are favourable, if Less More Same Different Answer2

C A
the current index in comparision

V
to the base year index is

35 GBTT considers Ratio of Ratio of Ratio of earnings Ratio of Answer2

exports to that volume of from exports to earnings from
of imports imports to that of impoerts imports to
exports that exports
36 Reciprocal demand is expressed Cost curves Supply Curves Offer curves Demand Answer3
in terms of _______. curves

37 Low factor prices result in low Commodity High Equal commodity Inflated Answer1
cost of production & in turn prices Commodity prices commodity
________. prices prices

38 Utility Terms of Trade was Alfred Walras Jacob Viner J.M Keynes Answer3
introduced by __________. Marshall
39 Low factor prices result in low Commodity High Equal commodity Inflated Answer1
cost of production & in turn prices Commodity prices commodity
________. prices prices

40 The terms of Trade reflects a Production Export Import Investment Answer3

country's capacity to __________.

41 Gross barter terms of trade takes All the items Only sevices Trade items & Tangible Answer3
into account unilateral items
payments

42 One of the problems of Terms of Price index Social Market condition Taxation Answer1
Trade is: behaviour

43 Single factoral terms of trade Export & Changes in Changes in Changes in Answer2
takes into account changes in Import Prices efficiency of demand for supply of
factors imports goods

44
VCA
The Gross Terms of Trade is Paul Sweezy
producing
export goods

Paul Kaldor Taussig Answer4

defined by: Samuelson
45 Cultural changes due to Positive Negative Both positive & Different Answer3
international trade are always negative

46 The NBTT considers Ratio of price Quantity of Percentage of Volum of Answer1

of exports to export & export & imports export &
that of imports imports imports

47 The gains from trade depend on Volume of Trade policy International Tariff Answer1
the ______. Trade understanding

48 One of the assumptions of Improves Remain Degrades Changes Answer2

VCA
Ricardian theory is that the constant
production technology:

49 Assumptions of H.O theory, there Two Three Four Five Answer1

are __________ commodities

50 Bertil Ohlin was a ____________ Teacher Disciple Father Son Answer2

of Prof. Heckscher:

Module II
51 ______________describe Economic International Only Import Only export Answer2
Commercial policy. activities trade policy

52 _____________is the highest Preferential Free trade Customs Union Economic Answer4
from of economic integration. trading system union union

53 A tariff implies tax within a across the within a local area in industrial Answer2
country country market

54 _______ not the correct objective Increase in Economic Promote Increase Answer2
of the free trade national growth competition corruption
income

55 International trade agreements are Individuals Countries Trusts NGOs Answer2

between

56 ASEAN was formed with the European American Bangkok Asean Answer3
signing of____________. declaration declaration declaration declaration

57 under free trade who benefits Middleman Importers Agents Consumer Answer4
most :
58 A situation where countries Price Full cost Dumping Price Answer4
export a product at a price below skimming pricing discriminatio
the cost of its production n

59 Free trade is based on the Comparative Comparative Production Valuation of Answer1

principle of : cost advantage disadvantages possibility International
advantage market

60 One of the methods to control Credit flow Money supply Licenscing Security Answer3
imports is transaction

61 Advalorem tariff means according Quantity Quality Value Features Answer3

to

62 Specific tariffs are imposed on Price Physical Features Quality Answer2

_______ of a good quantity

63 Protective trade is good as it increases Reduces Promotes exports Causes Answer2

imports imports and imports inflation

64 Free trade results in Reduced prices low interest Reduced growth Reducued Answer1
rates rates employment
65 International trade agreements are Necessary Non-essential Mandatory Voluntary Answer1

66 Brexit has caused ________ Favourable Unfavourable Neutral Negative Answer2

effects in English economy

67 ASEAN is a regional group of South South East South African Australian Answer2
_______ nations American Asian

68 Import quotas favour _________ Domestic International Labour Money Answer1

market

69 Free trade improves Size of Size of market Savings land Answer2

population productivity

70 Protective trade favours Encouragemen Export Free flow of Reduced Answer2

t to imports promotion foreign goods exports

71 Free trade is followed as it serves Rational prices Inflation Low consumption Primitive Answer1
purpose of technologies
72 Free trade policy refers to Does not Tariff barriers Control on Non –tariff Answer1
restrict imports foreign exchange barriers
and exports.

73 A tariff is a tax impose on: Quality goods Domestic Foreign goods & Specific Answer3
& services goods & services goods&
services services

74 Bilateral quotas are decided by Single country Mutually Unilaterally NGOs Answer2

75 The primary objective of Reduce volume Increase Labour Ineffective Answer2

commercial policy is of trade volume of inefficiency competition
trade

76 Protective devices are Fees Fines Taxes Tariffs and Answer4

77 Free trade makes a country Dependent

VCA
Independent Corrupt
quotas

Traditional Answer1

78 Fiscal union has common Industrial Trade Fiscal Infrastructural Answer3

_________ policy
79 Pick out the wrong statement: Tariffs are Tariffs are Tariffs reduce the Tariffs affect Answer3
primarily levied to prices of the the income
levied to earn protect commodity on and
domestic which it is levied employment
indurstries

80 The members of a trade bloc are Various Specific One Within a Answer2
country

81 _____________is the highest Preferential Free trade Customs Union Economic Answer4
from of economic integration. trading system union union

82 Revenue effect of tariff implies Increase in tax Decline in tax Constant tax No change in Answer1
revenue revenue revenue tax revenue

83 The referendum for Brexit was July 1st June 23rd Setember 1, 2017 Setember 2, Answer2
held on ___________. 2017 2016 2017

84 Free trade promotes Savings Production Environmental Social Answer2

efficiency balance customs
85 A protectionist measure whereby Common Technological Common quota Non-tariff Answer1
members of a regional trading external tariff standards arrangements agreement
bloc agree to impose an identical control
rate of protection on all goods
imported from non-member
countries.

86 Import quotas result in Reduced Increase in Techincal Increase in Answer1

imports imports development foreign
exchange

87 _________ of the following is not Money Capital Labor Capital Answer1

considered as factors of
production

88 Free trade policy implies Liberal Controlled Government Planned Answer1

__________ international trade determined

89 Trade between two countries can Equal Different Undetermined Decreasing Answer2
be useful if cost ratios of goods
are …………..

90 Brexit means UK to be Part of EU Out of EU Part of export Part of Answer2

union common
market
91 Free trade leads to Increase in Better Decline in Decrese the Answer2
prices standard of standard of living welfare of the
living people

92 Import quotas are fixed by the Foreign State Union government International Answer3
government government bodies

93 Protection is provided through Tariffs Domestic Restriction on Discouraged Answer1

taxes production export

94 The objectives of the commercial Increase trade Not to protect Not to restrict Increase Answer1
policy is relation domestic import goods Tariff barriers
market

95 Free trade lowers the Cost of Efficiency in International International Answer1

production production competition relationship

96 Protective Trade Policy causes: Less resource Increase Improve Technological Answer1
utilization foreign competition progress
exchange

97 Free trade also Decrease Increase Constant Abolished Answer1

____________domestic
monopolies.
98 Advalorem tariff means according Quantity Quality Value Features Answer3
to

99 A fiscal union ia an agreement to Common trade Common Common tax rates Complete Answer3
have ___________. policy monetary harmonizatio
policy n of all
economic
trade rules

100 Free trade is followed as it serves Rational prices Inflation Low consumption Primitive Answer1
purpose of technologies

Module III

101 Interest and dividend received Capital Current Gold account Savings Answer2
and paid are included in: account account account

102 _______ is a systamatic record of Balance of Budget Tresurry bills Guilt - Edge Answer1
all economic transaction between payment
the residents of the reporting
country and the residents of
foreign country
103 Total imports rises because of: Development Technological Technical Income Answer1
projects progress population inequality

104 _______ records the difference Trade Account Current Capital account Reserve Answer1
between exports and imports of Balance account balance Balance
goods only balance

105 Disequilibrium in BoP implies: Imports ≠ Imports = Tax = Public Public Answer1
Exports Exports expenditure revenue =
Public
expenditure

106 Interest ,profits and dividends receipts in the receipts in the receipts in the payments in Answer 3
earned by residents from abroad capital account trade account current account trade account
are entered as______

107 WTO is __________ organization Temporary Permanent Bilateral Unilateral Answer2

108 Special drawing rights are a part foreign current capital account trade account Answer1
of ______ exchange account
reserves
109 The surplus BoP means Receipts < Receipts > Receipts = Receipts ≠ Answer2
Payments Payments Payments Payments

110 Foreign direct investment are foreign current capital account trade account Answer3
include in _______ exchange account
reserves

111 TRIPS has resulted in Corruption Consumption Innovation Unemployme Answer3

nt

112 Remittances from nationals unilateral unilateral bilateral receipts bilateral Answer1
working abroad are considered as receipts payments payments

113 The current account of BoP Short term Long Term FDI Unilateral 4
includes loans loans transaction

114 whenever current account deficit foreign foreign foreign exchange domestic Answer2
exceeds the inflow in capital exchange from exchange from from the current money supply
account ____ is used to meet the the capital the reserve account
deficit account account
115 Forward Exchange rate is Advance Future Present on the day of Answer1
determined in currency
transaction

116 Accomodating flows into the ordinary course gaps in import and export flow of Answer2
balance of payments take place of foreign trade balance of of goods only foreign direct
due to________ payments and portfolio

VC A
caused by investment
autonomous
transactions

117 RBI seeks to __________ increase reduces manage destabilize Answer3

exchange rate

118 Autonomous receipts > foreign current capital account trade account Answer3
Autonomous payment ______ exchange account balance balance
will be in surplus reserves balance

119 The BoP is a financial statement domestic international regional financial Answer2
accounting transaction

120 In a technical sense, a country's always balance may show will never balance may show Answer1
balance of payments ________ surplus deficit
121 The capital account includes goods services financial gifts Answer3
transactions

122 ______ is the sum of current Basic balance Trade balance Reserves balance Overall Answer1
account and capital when the balance
difference between the two sides
of the two account is zero

123 The causes on deficit in BoP excess exports excess imports increase in FDI increase in Answer2
FPI

124 _________ results in people Snob appeal Demonstration Veblien effect Bandwagon Answer2
imitating the consumption pattern effect effect
of foreigners and demanding
more imports
125 Increase in the supply of foreign Devaluation Revaluation Fixed price Higher price Answer2
exchange leads to ___________
of currency

126 ______ is not the cause of deficit Capital inflow Globalisation Incease in Imports Fall in Answer1
in the balance of payment exports
127 The WTO promotes __________ unilateral bilateral free restrictive Answer3
trade

128 Expenditure reducing policies tight monetary contractionary expansionary Contractioary Answer4
consist of ______ policy fiscal policy monetary and monetary and
fiscal policy fiscal policy

129 The deficit in BoP can be Family Selective Accomodative Educational Answer3
adjusted by the following Planning Monetary
measures

130 Devaluation results in ______ cheaper cheaper fall in exports immediate Answer1
exports imports increses in
domestic
prices

131 TRIPS protects investments intellectual trade in goods trade in Answer2

properties services

132 Tariffs imposed to reduce imports monetary direct measure both direct and Trilemma Answer2
constitute ______ measure indirect measures
133 The deficit in BoP is due to economic disinvestment population growth exports Answer3
growth

134 A long run disequilibrium in Phases of sudden natural sudden increase in continuous Answer4
balance of payments is caused business cycle disaster demand for excess
by_______ imports demand for
foreign
exchange
over supply

135 Invisible transactions refer to commodities services machinery land Answer2

136 ______disequilibrium is caused Frictional Structural Cyclical steady Answer3

due to international transmission
of economic ups and downs

137 Autonomous flow is due to monetary fiscal controls government capital Answer4
controls controls movements

138 If a country experiences low may not rise will will always rise will not be Answer1
elasticity of demand for its continuously affected by
exports then its fall elasticity of
exports__________ demand
139 WTO follows trade contols economic fiscal controls monetary Answer2
reforms controls

140 Devaluation to be successful the zero Less than one Greater than one One Answer3
sum of total of export - import
demand elasticities must be equal
to _______
141 The capital account records all commodity services financial Answer4
transactions

142 The only international WTO UN IMF World bank Answer1

organisation dealing with the
global rules of trade between
nations.
143 The deficit is resolved in the BoP taxation external subsidies issue of Answer2
by borrowing shares

144 __________ subsidies are not Amber Green Blue Red Answer2
specific to an enterprise or
industry

145 TRIMS has direct impact on barter trade in goods ecological balance political Answer2
transaction stability
146 Protection is made available for 20 30 10 40 Answer1
_____ years for patents.

147 An impact of WTO Agreements is increase in constant tariffs decline in tariffs no change in Answer3
tariffs tariffs

148 WTO incorporates proposals Keynes Ricardo Adam Smith Arthur Answer4

VCA
made of _______ Dunkel

149 AOA has resulted in ______ increased reduced withdrawn no change Answer2
subsidies provision

150 ________ agreement deals with AOA TRIPs TRIMs GATs Answer4
trade in services

Module IV

151 The non-resident deposits in resolve create increase decrease Answer1

foreign currency is to _________
deficit in BoP
152 A_______ currency is an Vehicle fiat hard reserve Answer1
internationally accepted currency

153 The PPP theory states changes in production exports price level imports Answer3
________ causing change in
exchange rate

154 ________ is the current exchange Spot rate Intermediate Equilibrium rate Forward rate Answer1
rate rate

155 Unilateral receipts results in increase in increase in declined demand reduced Answer2
demand supply supply

156 The ____ market in the foreign wholesale retail forward spot Anser2
exchange market is the secondary
price maker

157 RBI's intervention is for reduced increased inflation of foreign deflation of Answer1
volitility in volitiltiy in exchange foreign
exchange rate exchange rate exchange
158 ______ is not a function of the Determining Provision of Risk Coverage Transferring Answer1
foreing exchange market interest rate credit purchasing
power
between
different
countries

159 Speculation of foreign currency fluctuation stabilization control government Answer1

results in ___________ in its intervention
price

160 Purchase of an asset from a lower Speculation Hedging Arbitrage Smuggling Answer3
price market and simultaneous
sale in higher price market is
called as _______

161 Official excahnge rate is brokers central bank exporters importers Answer2
determined by

162 ________ operate in the foreign Bidders Hedgers Arbitragers Speculaters Answer4
exchange market primarily for the
purpose of making profit

163 The central bank ___________ influences does not destabilizes adversely Answer1
exchange rate inlfluence affects
164 Forward points are added to the rebate compound discount premium Answer4
spot rate if the foreign currency is
traded at a________

165 RBI's intervention is not necessary necessary mandatory optional Answer2

___________ in foreign exchange
market

166 In case of ______ rate immediate spot Bank forward CRR Answer1
delivery of currency has to be
made

167 Market exchange rate is supply of demand for supply and labour wages Answer3
determined by the foreign foreign demand for
exchange exchange foreign exchange

168 When the forward exchange rate Spot rate Forward point forward deal outright rate Answer4

VC A
is expressed in terms of the
amount of local currency at which
a dealer will buy and sell a unit of
foreign currency, it is known as
________

169 Spot exchange rate makes immediately in future past period never Answer1
payment in currency
170 Cover risk arising from Speculation Hedging Arbitrage Smuggling Answer2
fluctuating exchange rates is
feature of ______

171 The RBI follows ___________ to CRR SLR OMO Repo Rate Answer3
manage exchange rate

172 ________ is not included in the MNCs Tourist Individuals Commercial Answer4
definition of retail clients in the Banks
foreign exchange market

173 It does not participate in foreign SBI PNB BOB RRB Answer4
exchange transactions

174 ______ generates demand for Export of Excport of Export of capital Import of Answer3
foreign exchange goods services capital

175 An important agency in the RBI NABARD SIDBI IFCI Answer1

foreign excahnge market is

176 ______ generates supply for Unilateral Export of Import of services Unilateral Answer1
foreign exchange receipts capital Payment
177 An absolute version of PPP human index income index price index expenditure Answer3
theory determines exchange rate index
on the basis of

178 The exchange rate between two Mint parity Purchasing Exchange rate Currency Answer1
currencies underthe gold standard power parity Currency parity parity
was determined by

179 Foreign exchange market commodity service foreign currency gold Answer3
determines the price of a

180 Under IMF the ____________ British pound US Dollar Euro France Answer2
was accept as an internatinal
reserve currency

181 The demand for foreign exchange Increase in Increase in Increase in exports Increase in Answer2
rises due to domestic imports savings
investment

182 In 1960s the IMF system came Huge Limited gold Huge accumulated Financial and Answer3
under stress due to which of accumulated movement deficit in US banking
following reasons? surplus in US between budget crises in the
budget countries US
183 One of the players in foreign Nidhis Chit funds Commercial banks Money Answer3
exchange market is lenders

184 Under _____________a nation Eurozone Currency Dollarization Mangement Answer2

rigly fixed the exchange rate of its Arrangements Board flexiibility
currency to a forgein currency in Arrangements
a order to fight inflation and deep
financial crisis.

185 Arbitrage of currency implies high priced low priced commodity labour Answer2
buying of currency in
___________ market

186 LERM was introduced in _____ 1980 1991 1992 2000 Answer3

VCA
187 RBI seeks to __________ increase reduces manage destabilize Answer3
exchange rate

188 Between 1947 and 1971, India Par Value LERMS Basket - Peg Managed Answer1
followed the system flexible
system
189 Forward Exchange rate is Advance Future Present on the day of Answer1
determined in currency
transaction

190 _______ version of PPP theory, Absolute Relative Monetary Fiscal Answer2
changes in the equilibrium rate of
exchange will be governed by the
changes in the ratio of the
respective purchasing power in
the two countries
V C A
191 Full convertibility on current 1991 1994 1992 1993 Answer2
account was introduced in

192 ______ is not an assumption of No trade Two goods are Transport cost Transport Answer3
law of one price barriers identical exist cost are
absent

193 The purchasing power parity Ricardo Keynes Gustav Cassel Pigou Answer3
theory is explained by

194 Identical price will have the same Law of one Law of returns Law of demand Law of Answer1
price in different markets when price to scale Supply
the prices are expressed in the
same currency______
195 Equilibrium exchange rate is Unequal Equal Extreme Fluctuating Answer2
determined where demand and
supply for foreign currency are

196 when the demand for foreign the appreciate the foreign the domestic the exchange Answer3
exchange rises, with no change in currency will currency will currency will rate remain
its supply, then depreciate depreciate depreciate against constant
against the against the the foreign
foreign domestic currency
currency currency

197 Spot exchange rate is where Future Past Current After 1 year Answer3
currencies are transacted in
__________ period

198 A high interest rate in the country, Reduce the Increase the Increase the Decrease the Answer2
assuming that interest rate in the supply of supply of demand of foreign demand of
foreign country remains the same, foreign foreign currency in the foreign
will currency in the currency in the home market currency in
home market home market the home
market

199 Foreign Exchange Rate in India is Controlled Fluctuating Managed Fixed Answer3
200 IMF started to operate in ______ 1944 1947 1954 1995 Answer2

VCA