Static Quiz 24 April 2025 (Economy)
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Static Quiz 24 April 2025 (Economy) For UPSC Exam
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- Question 1 of 5
1. Question
The Capital Account of BoP includes:
1. Foreign Direct Investment
2. External Commercial Borrowings
3. Remittances from abroad
Select the correct answer:CorrectAnswer: (a) 1 and 2 only
Explanation: The Capital Account of the Balance of Payments includes capital transactions such as Foreign Direct Investment (FDI) and External Commercial Borrowings (ECB). Remittances from abroad are a part of the Current Account, not the Capital Account.IncorrectAnswer: (a) 1 and 2 only
Explanation: The Capital Account of the Balance of Payments includes capital transactions such as Foreign Direct Investment (FDI) and External Commercial Borrowings (ECB). Remittances from abroad are a part of the Current Account, not the Capital Account. - Question 2 of 5
2. Question
A persistent current account deficit leads to:
CorrectAnswer: (a) Depreciation of currency
Explanation: A persistent current account deficit implies that a country is importing more than it is exporting, which can lead to a depreciation of the currency as there is a higher demand for foreign currency to settle payments.IncorrectAnswer: (a) Depreciation of currency
Explanation: A persistent current account deficit implies that a country is importing more than it is exporting, which can lead to a depreciation of the currency as there is a higher demand for foreign currency to settle payments. - Question 3 of 5
3. Question
Consider the following statements:
1. BoP always balances in accounting terms.
2. A BoP surplus implies the country is borrowing from the rest of the world.
Which of the above is/are correct?CorrectAnswer: (a) 1 only
Explanation:
• Statement 1 is correct because the Balance of Payments (BoP) is a double-entry system, meaning that all transactions are recorded in such a way that the BoP always balances.
• Statement 2 is incorrect because a BoP surplus indicates that the country is receiving more inflows than outflows, not borrowing from the world.IncorrectAnswer: (a) 1 only
Explanation:
• Statement 1 is correct because the Balance of Payments (BoP) is a double-entry system, meaning that all transactions are recorded in such a way that the BoP always balances.
• Statement 2 is incorrect because a BoP surplus indicates that the country is receiving more inflows than outflows, not borrowing from the world. - Question 4 of 5
4. Question
Consider the following:
1. Foreign direct investment (FDI) is a part of the current account.
2. BoP includes both visible and invisible transactions.
3. A BoP deficit may lead to depreciation of the domestic currency.
Select the correct answer:CorrectAnswer: (b) 2 and 3 only
Explanation:
• Statement 1 is incorrect. FDI is part of the capital account, not the current account.
• Statement 2 is correct. BoP includes both visible (goods) and invisible (services, income, transfers) transactions.
• Statement 3 is correct. A BoP deficit typically leads to a depreciation of the currency due to higher demand for foreign currency and lower supply.IncorrectAnswer: (b) 2 and 3 only
Explanation:
• Statement 1 is incorrect. FDI is part of the capital account, not the current account.
• Statement 2 is correct. BoP includes both visible (goods) and invisible (services, income, transfers) transactions.
• Statement 3 is correct. A BoP deficit typically leads to a depreciation of the currency due to higher demand for foreign currency and lower supply. - Question 5 of 5
5. Question
BoP is a:
CorrectAnswer: (c) Record of international transactions
Explanation: Balance of Payments (BoP) is a statistical record that summarizes the international transactions of a country during a specific period, including imports, exports, capital flows, and other cross-border transactions.IncorrectAnswer: (c) Record of international transactions
Explanation: Balance of Payments (BoP) is a statistical record that summarizes the international transactions of a country during a specific period, including imports, exports, capital flows, and other cross-border transactions.
