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International experience of exchange rate systems - class-XII

Description: international experience of exchange rate systems
Number of Questions: 31
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Tags: economics open economy macroeconomics international economics
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Who out of the following is not included in "Residents" in BOP transactions ?

  1. Firms

  2. Foreign military personnel

  3. Government agencies

  4. Individuals


Correct Option: B

Gold standard exchange rate regime was a flexible exchange rate regime.

  1. True

  2. False


Correct Option: A

Under the gold standard, all currencies were defined in terms of _____________.

  1. brass

  2. bronze

  3. silver

  4. gold


Correct Option: D

The Bretton Woods exchange rate system was a three-tier system of currency convertibility. 

  1. True

  2. False


Correct Option: B

Other things remaining unchanged, when in a country the price of foreign currency rises, national income is __________.

  1. likely to rise

  2. likely to fall

  3. likely to rise and fall both

  4. remain unaffected


Correct Option: A
Explanation:

Other things remaining unchanged, when in a country the price of foreign currency rises, national income is likely to rise as it indicates that the greater flow of foreign exchange in the domestic economy promotes higher level of development. Hence, national income rises as the price of foreign currency rises.

GDR stands for _______.

  1. Global Depository Receipts

  2. Global Demand Receipts

  3. Government Department Receipts

  4. Gold Deposit Receipts


Correct Option: A

The exchange rate system established under the Smithsonian agreement lasted for only 16 months.

  1. True

  2. False


Correct Option: B

Foreign exchange received on account of export of Jute will be recorded in capital account.

  1. True

  2. False


Correct Option: B
Explanation:

Foreign exchange received on account of export of Jute will be recorded in the CREDIT (positive) side of the CURRENT account as it comes under export of visible items.

The gold standard was the epitome of the _______________.

  1. floating exchange rate system

  2. fixed exchange rate system

  3. managed floating system

  4. none of the above


Correct Option: B

_____________ exchange rate regime prevailed between 1870 to 1914.

  1. Smithsonian

  2. Gold standard

  3. Brettonwoods

  4. Dollar-based


Correct Option: B

The problem with the Bretton Woods exchange rate system was identified by Robert Triffin and was termed as _____________.

  1. Triffin dilemma

  2. Triffin paradox

  3. Triffin rigidity

  4. none of the above


Correct Option: A

_____________ established an exchange rate system in 1971.

  1. Bretton woods conference

  2. Smithsonian agreement

  3. Triffin paradox

  4. None of the above


Correct Option: B

The Bretton Woods exchange rate system was established as a fixed exchange rate system, in the conference held at Bretton Woods in __________.

  1. 1925

  2. `1912

  3. 1944

  4. 1933


Correct Option: C

Which of the following is/are the reasons for the collapse of Bretton Woods system?
$1$. The refusal by the US Treasury to convert short-term liability into gold.
$2$. The US move to make dollar inconvertible.
$3$. The devaluation of US dollar in 1973.
Select the correct answer using the code given.

  1. $1$ only

  2. $1$ and $2$

  3. $2$ and $3$

  4. $1, 2$ and $3$


Correct Option: A

The breakdown of the Bretton Woods System was in _________.

  1. 1990

  2. 1969

  3. 1971

  4. 1981


Correct Option: C

The National Stock Exchange recently launched Interest Rate Futures (IRF). IRF in fact is a ______________.

  1. new mode of trading specifically for SME sector

  2. financial mode of trading

  3. electronic mode of transferring money from one account to another

  4. safest and fastest mode of trading at all the stock exchanges of India simultaneously


Correct Option: B
Explanation:

The National Stock Exchange recently launched Interest Rate Futures (IRF).

IRF in fact is a financial mode of trading as investors can buy and sell interest rate futures contracts from different locations in the country through registered NSE brokers in the same manner as they buy and sell equities and derivatives today. The financial settlement of all the trades is guaranteed by National Securities and Clearing Corporations Ltd (NSCCL).

The Smithsonian Agreement was a temporary agreement negotiated in ____________.

  1. 1971

  2. 1976

  3. 1970

  4. 1980


Correct Option: A

Many times we read about 'PPP' in economic literature. What is PPP?

  1. Tells us the exchange rates between currencies are in equilibrium when their purchasing power is the same in both the countries

  2. It tells us the exchange rates between currencies are in equilibrium when they are adjusted for differences in purchasing power.

  3. PPP means the current exchange rate of a currency against US$

  4. A measure of income inequality in developing countries


Correct Option: B
Explanation:

The acronym PPP stands for, "Purchasing Power Parity". It is a method of currency valuation that tells us that the exchange rate between two countries must be equal to the ratio of the currencies' respective purchasing power. ie. two identical goods should eventually cost the same in different countries once adjusted for purchasing power parity.

The Bretton Woods Conference set up the ________________.

  1. World Bank

  2. IMF

  3. Asian Development Bank

  4. WTO


Correct Option: B

Full form of SDRs:

  1. Suitable Drawing Rights

  2. Special Drawing Rights

  3. Special Derivation Rights

  4. None of the above


Correct Option: B
Explanation:

Special drawing rightsSpecial drawing rights (abbreviated SDR, ISO 4217 currency code XDR (numeric: 960)) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF).

The Triffin Dilemma was named after ____________. 

  1. John Triffin

  2. Robbert Triffin

  3. Henry Triffin

  4. Adam Triffin


Correct Option: B

Which conference had given birth to International Monetary Fund?

  1. Uruguay Round Conference

  2. Round Table Conference

  3. Bretton Woods Conference

  4. Simla Conference


Correct Option: C
Explanation:

The Bretton Woods conference was held in washington, DC in 1944. It was the period after the great depression and most economies in Europe were failing thus the IMF was set up as a bank where member states could draw from to maintain economic activity and employment through periodic crises.

The Gold Standard was from the period _______________.

  1. 1872-1920

  2. 1870-1914

  3. 1865-1900

  4. 1870-1900


Correct Option: B

The Smithsonian agreement devalued the U.S. dollar by _________ relative to gold.

  1. 9.5%

  2. 8.5%

  3. 8%

  4. 9%


Correct Option: B

FOB stands for  _______.

  1. Free On Board

  2. Free Of Bond

  3. Freight On Board

  4. Freedom Of Bond


Correct Option: A

Tariff means ________.

  1. a tax on imported goods

  2. a tax on exports

  3. a tax on consumption

  4. a tax on savings


Correct Option: A

Quantitative restrictions mean _________.

  1. a restriction by Government on quantity of export or imports of goods from or to a country

  2. a restriction by Government on quantity of production of goods by a country.

  3. a restriction by Government on quantity of sale of goods by a manufacturer

  4. a restriction by Government on quantity of quantity of raw material consumed.


Correct Option: A

International reserves include _______. 

  1. government holding of gold

  2. balance in International Monetary Fund

  3. foreign currency reserves

  4. all the three


Correct Option: D
Explanation:

International reserves include gold reserves, forex reserves and a balance held with the IMF that he country can draw from with times off stress. All three help the country maintain its position on the international market and manage its balance of payment account, by influencing its exchange rate.

The share of concessional debt in total external debt of India had _________ in 2011.

  1. remained the same

  2. doubled

  3. reduced

  4. increased


Correct Option: C
Explanation:

The share of concessional debt in total external debt of India had reduced to $18\%$ in June $2011$.

ADR stands for _____.

  1. Australian Depository Receipts

  2. Ancient Demand Receipts

  3. American Depository Receipts

  4. Asian Diamond Reserves


Correct Option: C
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