TEST-3

ECONOMICS-XII
Time: 2 Hrs. M.M: 55
General Instructions:
1. All the questions are compulsory.
2. Marks are indicated against each question
3. Question nos. 1 to 11 are very short answer type questions carrying one marks each.
Answer to each of them should be given in one sentence/word
4. Question nos. 12 to 25 are short answer type questions carrying 3 marks each. Answer to
each should be given seventy words
5. All answers should be specific to the point and the above word limit should be adhered to
as far as possible.

Q 1 to 11 - 1 mark each

1.Which of the following agency is responsible for issuing 1 currency note in India?
(a) Reserve Bank of India
(b) Ministry of Commerce
(c) Ministry of finance
(d) Niti Aayog

OR

The price of 1 US Dollar has fallen from Rs. 50 to Rs. 48. Has the Indian currency
appreciated or depreciate

2.What is a ‘legal tender’?

3.Other things remaining the same, when in a country the market price of foreign currency
falls, national income is likely: (Choose the correct alternative) [A
(a) to rise (b) to fall
(c) to rise or to fall
(d) to remain unaffected

4.What impact will fall on the expenditure of an American citizen who comes to India for
Medical treatment if foreign rate is increased?

5.Why did India devalue its currency in 1991? 

6.Do you think that a rise in BPO services a good source of supply of foreign currency?

7.Other things remaining the same, when in a country the market price of foreign currency
falls, national income is likely: (Choose the correct alternative) [AT 2015]
(a) to rise (b) to fall
(c) to rise or to fall
(d) to remain unaffected
8. Define Venture Capital. 

9. Foreign exchange is demanded by………………..

(a) domestic residents to purchase goods and services from other countries
(b) sending gifts and grants to foreign countries (abroad)
(c) the domestic residents to purchase financial assets in a particular countiy
(d) all of them

10.Which function of foreign exchange market protects against the foreign exchange risk?
(a) Credit function
(b) Hedging function
(c) Transfer function

11. M1 in the money stock in India refers to:

(a) Post office savings deposits.
(b) Total post office deposits.
(c) Currency plus demand deposits plus other deposits with the RBI.
(d) Time deposits with banks.

Question 12 to 25 - 3 marks

12.State three main functions of commercial bank. Explain any one of them.

13.What are time deposits?     

 .

14.Explain Standard of deferred payments function of money.

15.Explain Store of value function of money

16.State two sources of demand for foreign exchange.

17.How can Reserve Bank of India help in bringing down the foreign exchange rate which is
very high?

18.How can increase in foreign direct investment affect the price of foreign exchange? 

19 What is meant by foreign exchange market? Explain hedging function of this market.

20. Are the following statements true or false? Give reasons.

A. An increase in demand for imported goods raises the supply for foreign exchange.

B. Depreciation of Indian rupees will occur when Rs. 55 have to be paid to exchange one US
$ instead of present rate of Rs. 50/$.

C. Revaluation and appreciation of currency are one and the same thing.

D.  In spot market sale and purchase of foreign currency is settled on a specified future
date.
21.Explain the ‘ Unit of account’ function of money.

22. Devaluation and Depreciation of currency are one and the same thing’. Do you agree?
How do they affect the exports of a country?

23. What impact will fall on the expenditure of an American citizen who comes to India for
Medical treatment if foreign rate is increased? 

24. What are the demerits of fixed exchange rate system? Explain

25. What are the reasons responsible for continuous rise in Forex Rate in India in last few
months.?Explain.