Download Open Economy - Indian School Al Wadi Al Kabir

INDIAN SCHOOL AL WADI AL KABIR
CHAPTER 6; Open Economy
1. Explain the meaning of devaluation?
2. Floating exchange rate is determined by;
a.mutual consultations between countries b. banking system c. market forces d.none of the
above.
3.
Give the meaning of Managed floating exchange rate?
A kind of flexible exchange rate system where the exchange rates are adjusted as per the
rules and regulations of foreign exchange market is termed as managed floating exchange
rate.
4. What is dirty floating exchange rate?
When adjustments of exchange rates are done without following the rules and regulations of
foreign exchange market is termed as dirty floating rate.
5. What is fixed exchange rate?
6. Managed floating exchange rate is called managed because it is influenced by the steps taken
by; a.Government b. Central bank c.World bank d. IMF.
7. Define foreign exchange rate?
8. Exchange rates refers to the rate at which the following is exchanged;
a.Goods b. Services c. Currencies d. All the above.
9. What is foreign exchange?
10. State two sources of supply of foreign exchange.
11. Why is supply curve of foreign exchange positively sloped?
12. In India
13. State two sources of demand for foreign exchange.
14. Define flexible exchange rate system.
15. When exchange rate falls in terms of domestic currency;
a.Domestic currency depreciates b. Foreign currency appreciates c.Domestic currency
appreciates d. No effect on domestic currency.
16. Explain the effect of appreciation of domestic currency on imports.
17. How is exchange rate determined in the foreign exchange market?
18. High fluctuations in market exchange rates adversely affect both exports and imports which
are crucial for the development of the country. What can central bank do to keep the
fluctuations within limits, but through the foreign exchange market only? Explain.
19. When price of a foreign currency rises, its demand falls. Explain why?
20. When the price of a foreign currency falls, the demand for that foreign currency rises.
Explain why?
21. In India exchange rate of US $ has risen considerably. What is its likely impact on Indian
exports and why?
22. Distinguish between fixed and flexible foreign exchange rate.
23. Balance of payments of a country is a statement that records;
a. Sources of foreign exchange b. Uses of foreign exchange c. Both (a) and (b) d. None of
the above.
24. What is meant by appreciation and deprecation of domestic currency? Explain.
25. What is trade balance?
26. Balance of trade equals
a. Exports less imports b. Exports of goods less imports or goods c. Exports of services less
imports of services d. None of the above.
27. Name two invisibles of the balance of payments account.
28. What does a deficit in balance of trade indicates?
29. Are the following entered on the credit side or the debit side in BOP account? Give reason.
(i)
Exports
(ii) Lending to the rest of the world.
30. State the components of capital account of balance of payments.
31. What does a balance of payments account show? Name the parts of the balance of payments
account.
32. Which transactions determine the balance of trade? What is balance of trade in surplus?
33. List the transactions of current account of the balance of payments.
34. Distinguish between autonomous and accommodating transactions in BOP.