On the contrary, if our long-term lending reduces from Rs. (c) Both (a) and (b)(d) Neither (a) nor (b)Ans: BQ.11 Autonomous transactions take place on : (c) Both Current and Capital accounts(d) NeitherAns: CQ.12 Autonomous items are related to those transactions which : (a) are determined by motive of profit(b) are not concerned with the equilibrium status of BOP(c) both (a) and (b)(d) none of theseAns: CQ.13 Accommodating items are those items of BOP which: (a) are not determined by considerations of profit, (b) are conditioned by the positive or negative BOP status, (c) lead to increase or decrease in official reserves with RBI. By continuing, I agree that I am at least 13 years old and have read and agree to the. 7. Complete Since the repayment of these loans is spread over a long period, This helps the government to remove the deficit in the Balance of payments. We hope the same would help in quick understanding and revision. 3. If there was an increase in interest rates this would cause hot money flows to enter the UK, therefore there would be a surplus on the financial account (c)     Current Account of Balance of Payment. These developmental imports cause BoP disequilibrium. This is usually accompanied by an increase in consumer credit balances, as such spending is most easily done on credit cards and borrowed money. With reduction in imports and control of foreign exchange, visible and invisible imports are reduced. The deficit X 1 M 1 must be removed through an increase in exports. The monetary authorities of a country are the financiers when any deficit arises in the country’s balance of payment. The rise in exports must, therefore, be sufficient to wipe out the deficit X 1 M 1 as well as to Both these deficits reinforce each other and high fiscal deficit usually leads to a high current account deficit and vice versa. This would be treated as a, (a) Credit entry in capital account. A Malaysian company invests in a South African oil company. (c) Gifts paid to foreigners(d) Repayment of foreign loanAns: AQ.2 Outflow of foreign exchange is recorded on the ____ sides. A depreciation of the Rand. (a)  Investment from abroad(b) Import of goods. As per the balance of payments manual of the IMF, BoP comprises current account, capital account, errors and omissions, and change in foreign exchange reserves. Australia has generally had a current account deficit, reflecting attractive investment opportunities in the economy that exceed our capacity to fund via domestic saving. Home » Economics MCQS » Economics Objective Questions and Answers – Chapter 6 – Balance of Payment. None of the above. India has witnessed a surplus for the third successive year in which account of the balance of payment? 4. The balance of payment is a comprehensive and systematic records of all economic transaction between normal residents of a country and rest of the world during an accounting year. The correct answer is C. To reduce a balance of payments deficit requires a deflationary policy. To Study MCQs - Balance Of Payment Commerce Notes | EduRev for Commerce Therefore, there is always a risk, that investors will remove their investments causing a big fall in the value of your currency (devaluation). To reduce a balance of payments deficit requires a deflationary policy. your solution of MCQs - Balance Of Payment Commerce Notes | EduRev search giving you solved answers for the same. [AI 2008, CBSE 2013, Sample Paper 2013] Answer: Question 2. Due to depletion of reserves of gold and foreign cur­rencies, the countries with deficit balance of payments are forced to devalue their currency to over­come the deficit EduRev is a knowledge-sharing community that depends on everyone being able to pitch in when they know something. If the current account is in balance, the capital account is also likely to be in balance. 120 crores to Rs. You can also find MCQs - Balance Of Payment Commerce Notes | EduRev ppt and other Commerce slides as well. 20 crores. Commerce. Complete MCQs - Balance Of Payment Commerce Notes | EduRev chapter (including extra questions, long questions, short questions, mcq) can be found on EduRev, you can check out Commerce lecture & lessons summary in the same course for Commerce Syllabus. This is A very high balance of payments deficit may, at some point, cause a loss of confidence by foreign investors. (a) Firms(b) Foreign military personnel(c) Government agencies(d) IndividualsAns: BQ.10 “Unilateral Transfers” are also known as : (a) Bilateral Transfers(b) One-way Transfers. Economics Objective Questions and Answers – Chapter 6 – Balance of Payment, Unit Number 319, Vipul Trade Centre, Sohna Road, Gurgaon, Sector 49, Gurugram, Haryana 122018, India, Monday – Friday (9:00 a.m. – 6:00 p.m. PST) Saturday, Sunday (Closed), Liberalisation, Privatisation and Disinvestment. The three components of the balance of payments are the current account, financial account, and capital account. A deficit in current account always reflects in an increase in net financial claims of foreigners (i.e. These terms are connected with international trade accounting. Unchecked, a long-term rising deficit can … Q. _______ is a systematic record of all transactions of a country in a year. The balance of trade is the official term for net exports that makes up the balance of payments. The “current account” of balance of payments comprises the transactions between residents and non-residents in terms of goods, services and incomes. ____ is a systematic record of all the economic transaction between one country and rest of the would: 2. (a) To reduce the value of home currency in other currency. Explain how a country can run an overall balance of payments deficit or surplus. Ultimately, the deficit in the balance of payments is removed when exports rise faster than imports. 9. That's correct. Current account B. The balance of payment (BOP) crisis of 1991 in India The balance of payment crisis occurs when there are insufficient capital account surplus and foreign exchange reserves for financing the current account deficit. 5. Sometimes the balance of payments deficit results from extravagant spending, such as citizens taking expensive trips or gravitating towards luxury and exotic products that can only be sourced from abroad. Balance of Payment class 12 Notes Economics. 1. Accounts of Balance of Payments: 1. Consequently, an adverse balance of payment is corrected. © 2020, Arinjay Academy. But as the exports are raised, there will also be a rise in income which in turn will cause the people to import more from foreign countries. Balance of Payments Adjustment through Capital Movements: There will be a deficit in the balance of payments when the demand for foreign exchange exceeds its supply, and three will be a surplus when the supply of foreign exchange exceeds the demand. Countries with deficit bop found their international reserves dwindling which forced them to devalue their currency. MCQs - Balance Of Payment Commerce Notes | EduRev notes for Commerce is made by best teachers who have written some of the best books of 9. If you want MCQs - Balance Of Payment Commerce Notes | EduRev C. out Commerce lecture & lessons summary in the same course for Commerce Syllabus. A. Differentiate between Balance of Trade and Current Account Balance. Conversely, they are also the recipients when there is a surplus in the country’s BoP. (b) Balance of payments. The difference between the value of a nations visible exports and visible import is. (a)    To constant the value of home currency. Q.1 Which of the following items is entered on the credit side of BOP account ? If the current account is in deficit, then the capital account is likely to be in surplus. The government can also secure loans from foreign banks or foreign governments to reduce the deficit in the balance of payments. The balance of payments is regarded as being in disequilibrium when it shows either a surplus or a deficit. Download this set of multiple choice questions, designed to review your knowledge of the balance of payments and policies for tackling imbalances.. ADDITIONAL TEACHER GUIDANCE. He deposits $1 million with bank in India. (a) Balance of trade. (c) Either(d) Neither Ans: BQ.3 Transactions that take place to cover deficit or surplus are called ____ transactions. 29 Possible policies a government might use to reduce a deficit on the current account of the balance of payments include devaluation, government spending cuts, interest rate rises and tariffs on imports. In this post, we provide a mind-map approach to study the Balance of Payments. [Current A/c + Capital A/c Receipts ] < [Current A/c + Capital A/c Payments ] Autonomous transactions are those transactions which are carried out with economic motive irrespective of the present position of the BOP. (d) all of theseAns: DQ.14 Cause of BOP imbalance relates to : (b) accommodating items(c) both (a) and (b)(d) neither (a) nor (b)Ans: AQ.15 If balance of trade indicates a surplus of Rs. NCERT Solutions for Class 12 Macro Economics Chapter-10 Balance of Payment NCERT TEXTBOOK QUESTIONS SOLVED Question 1. Hence the country must borrow from other countries to pay for its imports. It is an important macro-economic indicator that helps a country’s Reserve Bank to gauge the economic trends in the past, and create monetary policies. You can see some MCQs - Balance Of Payment Commerce Notes | EduRev sample questions with examples at the bottom of this page. (a) Printing of new currency(b) Raising the rate of corporate taxes. In India which authority takes the purview of import & export: (a)    To reduce the value of home currency in other currency, (b)    To appreciate the value of home currency. (c) Restricting imports. Commerce MCQs - Balance Of Payment Commerce Notes | EduRev Summary and Exercise are very important for Crash Course of Macro Economics -Class 12, Reason Based & Extra Questions - Balance Of Payment, Scanner - Balance Of Payment, (2014 - 2018), Crash Course of Micro Economics -Class 12, Crash Course of Business Studies(BST)- Class 12, TS Grewal Solutions - Class 11 Accountancy, TS Grewal Solutions - Class 12 Accountancy. just for education and the MCQs - Balance Of Payment Commerce Notes | EduRev images and diagram are even better than Byjus! 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