Chapter 8: Foreign Sector — Online MCQ Test
ECONOMICS · CLASS 12 INTERMEDIATE 2 YEAR · Telangana State Board
Practice Chapter 8: Foreign Sector with a free chapter-wise online MCQ test.
This chapter covers: This chapter covers foreign trade trends balance of payments composition and direction of Indian exports imports foreign direct investment FDI and foreign capital flows..
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Chapter 8: Foreign Sector — Important Questions & Answers
What does Balance of Payments (BOP) record?
- A. Only exports of goods
- B. All economic transactions of a country with the rest of the world
- C. Only foreign direct investment inflows
- D. Only imports of services
Answer: B. All economic transactions of a country with the rest of the world
Balance of Payments is a systematic record of all economic transactions between residents of a country and the rest of the world during a given period.
Balance of Payments is a systematic record of all economic transactions between residents of a country and the rest of the world during a given period.
Which of the following is included in the current account of Balance of Payments?
- A. Trade in goods and services
- B. Purchase of government securities by foreigners
- C. Direct investment in a factory abroad
- D. Borrowing from IMF for long-term investment
Answer: A. Trade in goods and services
The current account includes exports and imports of goods and services, along with income and transfer payments.
The current account includes exports and imports of goods and services, along with income and transfer payments.
If a country’s imports are greater than its exports, it is said to have:
- A. Trade surplus
- B. Trade deficit
- C. Balanced trade
- D. Invisible surplus
Answer: B. Trade deficit
When imports exceed exports, the country faces a trade deficit, also called an adverse balance of trade.
When imports exceed exports, the country faces a trade deficit, also called an adverse balance of trade.
Which of the following statements about Balance of Payments is correct?
- A. A deficit in the current account must always mean total BOP deficit
- B. BOP is always in equilibrium in the accounting sense
- C. Capital account transactions are excluded from BOP
- D. BOP includes only visible trade
Answer: B. BOP is always in equilibrium in the accounting sense
As an accounting statement, the Balance of Payments always balances because every debit entry is matched by a credit entry.
As an accounting statement, the Balance of Payments always balances because every debit entry is matched by a credit entry.
Which of the following is NOT a correct statement about foreign exchange and the foreign sector?
- A. Foreign exchange is required for imports and external payments
- B. Exports earn foreign exchange for the country
- C. A surplus in the capital account can help finance a current account deficit
- D. Foreign trade and Balance of Payments are unrelated concepts
Answer: D. Foreign trade and Balance of Payments are unrelated concepts
Foreign trade is a part of a country’s external sector and is closely connected with the Balance of Payments and foreign exchange position.
Foreign trade is a part of a country’s external sector and is closely connected with the Balance of Payments and foreign exchange position.