Chapter Exam

Chapter 8: Foreign Sector — Online MCQ Test

Q: Which of the following is included in the current account of Balance of Payments?

Answer: A. Trade in goods and services — The current account includes exports and imports of goods and services, along with income and transfer payments.

Q: If a country’s imports are greater than its exports, it is said to have:

Answer: B. Trade deficit — When imports exceed exports, the country faces a trade deficit, also called an adverse balance of trade.

ECONOMICS · CLASS 12 INTERMEDIATE 2 YEAR · Telangana State Board

Practice Chapter 8: Foreign Sector with a free chapter-wise online MCQ test for Telangana State Board CLASS 12 INTERMEDIATE 2 YEAR ECONOMICS. 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.. AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 8: Foreign Sector — Important Questions & Answers (FAQ)

Frequently asked questions from Telangana State Board CLASS 12 INTERMEDIATE 2 YEAR ECONOMICS — Chapter 8: Foreign Sector, with answers and explanations. These are sample questions; the exam has its own separate question set.

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.

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.

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.

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.

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.