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Foreign Exchange
Foreign Exchange
Answer
Answer: a) Foreign exchange Rate
Answer
Answer: c) Depreciation
Answer
Answer: a) Exports rise
4. The increase in the value of domestic currency in relation to foreign
currency due to fluctuations in foreign exchange rate is called
a) Depreciation
b) Devaluation
c) Appreciation
d) Revaluation
Answer
Answer: c) Appreciation
Answer
Answer: b) Imports rise
Answer
Answer: d) Both (a) and (b)
Answer
Answer: c) Devaluation
Answer
Answer: c) Revaluation
Answer
Answer: a) Fixed exchange rate system
Answer
Answer: b) Fixed exchange rate system
Answer
Answer: b) Flexible exchange rate system
Answer
Answer: b) Flexible exchange rate system
14. The value of US Dollar $1 has increased form Rs. 60 to Rs. 70. It means:
a) Rupee has appreciated
b) Rupee has depreciated
c) Both (a) and (b)
d) None of the above
Answer
Answer: b) Rupee has depreciated
15. The value of US Dollar $1 has fallen form Rs. 70 to Rs. 68. It means:
a) Currency is depreciated
b) Currency is appreciated
c) Both (a) and (b)
d) None of the above
Answer
Answer: b) Rupee has appreciated
Answer
Answer: b) Floating exchange rate system
Answer
Answer: c) Dirty floating
19. When the value of a currency is fixed in terms of some other currency, it is
called:
a) Parity value
b) Free value
c) Money value
d) None of the above
Answer
Answer: a) Parity value
20. Which of the systems are covered under fixed exchange rate system?
a) Gold standard system
b) Adjustable peg system
c) Managed system
d) Both (a) and (b)
Answer
Answer: d) Both (a) and (b)
21. In which system of exchange rate, the exchange rate does not change
continuously?
a) Fixed exchange rate
b) Flexible exchange rate
c) Managed floating exchange rate
d) None of the above
Answer
Answer: a) Fixed exchange rate
22. Due to increase in demand of foreign currency, there is …. in the value of
domestic currency.
a) Appreciation
b) Depreciation
c) Devaluation
d) Revaluation
Answer
Answer: b) Depreciation
Answer
Answer: a) Appreciation
24. Due to increase in supply of foreign currency, there is—- in the value of
domestic currency.
a) Appreciation
b) Depreciation
c) Devaluation
d) Revaluation
Answer
Answer: a) Appreciation
26. What is the system in which the foreign currencies are bought and sold?
a) Foreign exchange market
b) Securities market
c) Both (a) and (b)
d) None of the above
Answer
Answer: a) Foreign exchange market
Answer
Answer: a) System
28. Which of the following are the buyers and sellers of foreign exchange?
a) Individual and firms
b) Foreign exchange brokers
c) Commercial and central bank
d) All of the above
Answer
Answer: d) All of the above
29. ________rate for India, is the value , at which all foreign currencies will be
exchanged for Indian Rupee.
a) Foreign exchange
b) Foreign investment
c) Foreign capital
d) None of these
Answer
Answer: a) Foreign exchange
Answer
Answer: b) Decrease
Answer
Answer: a) Devaluation
Answer
Answer: b) Intentionally by the government
33. Fixed exchange rate is fixed by the Government in terms of ____.
a) Currency
b) Gold Reserves
c) Fixed assets
d) All of these
Answer
Answer: b) Gold reserves
Answer
Answer: a) Managed floating
Answer
Answer: a) Foreign exchange rate
Answer
Answer: (c) Fixed exchange rate system
Answer
Answer: (d) Outflow of foreign exchange
39. Read the following statement given below and choose the correct
alternative
Statement 1- If foreign exchange rate of a country increases, Demand of
foreign exchange will also increase
Statement 2- If foreign exchange rate increases supply of foreign exchange
will also increase
a) Both are correct
b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
Answer
Answer: (d) Statement 1 is incorrect and statement 2 is correct
40. Read the following statement given below and choose the correct
alternative
Statement 1- Depreciation is the fall in the value of domestic currency against
foreign currency.
Statement 2- Depreciation occurs under the floating exchange rate system.
a) Both are correct
b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
Answer
Answer: (a) Both are correct
41. Read the following statement given below and choose the correct
alternative
Statement 1- Revaluation leads to decrease in exports of a country.
Statement 2- Revaluation leads to decrease in imports of a country
a) Both are correct
b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
Answer
Answer: (c) Statement 1 is correct and statement 2 is incorrect
42. Read the following statement given below and choose the correct
alternative
Statement 1- Flexible exchange rate leads to wastage of resources
Statement 2- Under flexible exchange rate system government doesn’t need
to hold huge reserves of foreign exchange
a) Both are correct
b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
Answer
Answer: (d) Statement 1 is incorrect and statement 2 is correct
43. Read the following statement given below and choose the correct
alternative
Statement 1- Under flexible exchange rate system economy doesn’t get the
advantage of open market
Statement 2- Under fixed exchange rate system economy gets the advantage
of open market
a) Both are correct
b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
Answer
Answer: (b) Both are incorrect
44. Read the following statement given below and choose the correct
alternative
Statement 1- Equilibrium under , floating exchange rate system is determined
where demand for foreign exchange is equals to supply of foreign exchange
Statement 2- Floating exchange rate system results in uncertainty in economy
a) Both are correct
b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
Answer
Answer: (a) Both are correct
Column A Column B
A. Fixed exchange rate 1. Depends on market forces
D. Floating exchange rate system 4. Provides the benefits of open Market to economy
a) A-1
b) B-2
c) C-3
d) D-4
Answer
Answer: (d) D-4
Column A Column B
Answer
Answer: (a) A-2
47. Choose the correctly matched pair from the following
Column A Column B
a) A-4
b) B-1
c) C-3
d) D-2
Answer
Answer: (c) C-3
Answer
Answer: (d) Result of depreciation
49. “The value of 1 dollar increased from ₹60- ₹65”. This is a situation of ;
a) Depreciation
b) Appreciation
c) Revaluation
d) Devaluation
Answer
Answer: (a) Depreciation
Answer
Answer: (b) Because this system is self adjusting
51. “Managed floating exchange rate is also called dirty floating exchange
rate, because”.
a) A country uses it against other countries for self interest
b) Government has to hold huge reserves of foreign exchange
c) Both (a) and (b)
d) None of the above
Answer
Answer: (a) A country uses it against other countries for self interest
52. Read the following statement given below and choose the correct
alternative
Assertion (A)- Foreign currency flows into the home country
Reason ( R)- Exports by a country leads to purchase of its domestic goods
and services by the foreigners.
a) Both assertion and reason are true. Reason is the correct explanation of
assertion
b) Both assertion and reason are true. Reason is not the correct explanation
of assertion
c) Assertion us true but reason is not
d) Reason is true but assertion is not.
Answer
Answer: (a) Both assertion and reason are true. Reason is the correct explanation of assertion
53. Read the following statement given below and choose the correct
alternative
Assertion ( A)- Under fixed exchange rate system, exchange rate is
independent of demand and supply of foreign exchange
Reason ( R)- Under fixed exchange rate system, exchange rate is officially
declared by the government
a) Both assertion and reason are true. Reason is the correct explanation of
assertion
b) Both assertion and reason are true. Reason is not the correct explanation
of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (b) Both assertion and reason are true. Reason is not the correct explanation of
assertion
54. Read the following statement given below and choose the correct
alternative
Assertion (A)- Demand for foreign exchange leads to inflow of foreign
exchange
Reason ( R)- Investment made by foreigners for purchasing financial and
physical assets causes inflow for foreign exchange
a) Both assertion and reason are true. Reason is the correct explanation of
assertion
b) Both assertion and reason are true. Reason is not the correct explanation
of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (a) Both assertion and reason are true. Reason is the correct explanation of assertion
55. Read the following statement given below and choose the correct
alternative
Assertion (A)- If foreign exchange rate increases the demand for foreign
exchange will fall
Reason (R )- There is an inverse relationship between demand for foreign
exchange and foreign exchange rate
a) Both assertion and reason are true. Reason is the correct explanation of
assertion
b) Both assertion and reason are true. Reason is not the correct explanation
of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (a) Both assertion and reason are true. Reason is the correct explanation of assertion
56. Read the following statement given below and choose the correct
alternative
Assertion (A)- Increase in foreign exchange rate makes Indian goods and
services relatively cheaper for foreigners
Reason ( R )- There is a negative relationship between supply of foreign
exchange and foreign exchange rate
a) Both assertion and reason are true. Reason is the correct explanation of
assertion
b) Both assertion and reason are true. Reason is not the correct explanation
of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (c) Assertion is true but reason is not
Read the case study given below and answer the questions that follows
Central banks (like RBI in India) follow up in the interest of their separate
governments. Their essential job is to guarantee the solidness of the public
money. A central bank incidentally applies its impact in the foreign exchange
market by either expanding or decreasing its country’s cash supply.
This will lower or raise the worth of the public money. National banks utilize
this strategy to settle quick changes in the worth of the country’s cash that can
result from both inward factors, like swelling, or outer elements. Varieties in
organic market can likewise cause changes in the worth of a specific cash.
At the point when interest for a money goes up (that is, when more purchasers
need to buy it), so does the cost of that cash on the lookout. This is known as
enthusiasm for the money.
On the other hand, when there is lower interest for a specific cash, the cost of
that money frequently goes down; this is called deterioration of the money. On
account of the gigantic measures of money being exchanged every day, even
a negligible part of a percent increment or lessening in worth can altogether
affect how a lot (or how little) a cash is exchanged.
57. What role does the Central Bank play in Foreign Exchange Market?
a) Provides financial assistance
b) Stabilizes the value of domestic currency
c) Increases the value of domestic currency
d) None of these
Answer
Answer: (b) Stabilizes the value of domestic currency
58. Under which foreign exchange rate system does the central bank
intervene in the foreign exchange market to stop fluctuations in the domestic
currency?
a) Fixed Exchange rate system
b) Flexible exchange rate system
c) Managed Floating Rate system
d) All of these
Answer
Answer: (c) Managed Floating Rate system
59. Central bank may _____ the value of domestic currency.
a) Raise
b) Lower
c) Both A and B
d) None of these
Answer
Answer: (c) Both A and B
Answer
Answer: (b) Decrease
Answer
Answer: (c) Decrease
62. Both appreciation and depreciation occurs under (choose the correct
alternative)
a) Managed floating exchange rate
b) Fixed exchange rate
c) Flexible exchange rate
d) None of the above
Answer
Answer: (c) Flexible exchange rate