Current Account

Description: This quiz is designed to assess your understanding of the concept of Current Account in Indian Economics.
Number of Questions: 15
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Tags: current account foreign trade balance of payments
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What is the Current Account?

  1. A record of all economic transactions between residents of a country and residents of other countries.

  2. A record of all financial transactions between residents of a country and residents of other countries.

  3. A record of all trade transactions between residents of a country and residents of other countries.

  4. A record of all investment transactions between residents of a country and residents of other countries.


Correct Option: A
Explanation:

The Current Account is a record of all economic transactions between residents of a country and residents of other countries. It includes trade in goods and services, investment income, and current transfers.

What are the components of the Current Account?

  1. Trade in goods, trade in services, investment income, and current transfers.

  2. Trade in goods, trade in services, and investment income.

  3. Trade in goods, trade in services, and current transfers.

  4. Trade in goods and investment income.


Correct Option: A
Explanation:

The components of the Current Account are trade in goods, trade in services, investment income, and current transfers.

What is the difference between the Current Account and the Capital Account?

  1. The Current Account records economic transactions, while the Capital Account records financial transactions.

  2. The Current Account records trade transactions, while the Capital Account records investment transactions.

  3. The Current Account records transactions between residents of a country and residents of other countries, while the Capital Account records transactions between residents of a country and non-residents.

  4. The Current Account records transactions in goods and services, while the Capital Account records transactions in financial assets.


Correct Option: A
Explanation:

The Current Account records economic transactions, while the Capital Account records financial transactions.

What is a Current Account deficit?

  1. When the value of a country's imports exceeds the value of its exports.

  2. When the value of a country's exports exceeds the value of its imports.

  3. When the value of a country's investment income exceeds the value of its current transfers.

  4. When the value of a country's current transfers exceeds the value of its investment income.


Correct Option: A
Explanation:

A Current Account deficit occurs when the value of a country's imports exceeds the value of its exports.

What is a Current Account surplus?

  1. When the value of a country's exports exceeds the value of its imports.

  2. When the value of a country's investment income exceeds the value of its current transfers.

  3. When the value of a country's current transfers exceeds the value of its investment income.

  4. When the value of a country's imports exceeds the value of its exports.


Correct Option: A
Explanation:

A Current Account surplus occurs when the value of a country's exports exceeds the value of its imports.

What are the factors that affect the Current Account?

  1. Economic growth, interest rates, exchange rates, and government policies.

  2. Economic growth, inflation, unemployment, and government policies.

  3. Economic growth, interest rates, exchange rates, and inflation.

  4. Economic growth, unemployment, inflation, and government policies.


Correct Option: A
Explanation:

The factors that affect the Current Account are economic growth, interest rates, exchange rates, and government policies.

How does a Current Account deficit affect a country's economy?

  1. It can lead to a depreciation of the country's currency.

  2. It can lead to an appreciation of the country's currency.

  3. It can lead to a higher inflation rate.

  4. It can lead to a lower inflation rate.


Correct Option: A
Explanation:

A Current Account deficit can lead to a depreciation of the country's currency.

How does a Current Account surplus affect a country's economy?

  1. It can lead to an appreciation of the country's currency.

  2. It can lead to a depreciation of the country's currency.

  3. It can lead to a higher inflation rate.

  4. It can lead to a lower inflation rate.


Correct Option: A
Explanation:

A Current Account surplus can lead to an appreciation of the country's currency.

What are the policy options available to a country to address a Current Account deficit?

  1. Devalue the currency, increase interest rates, and reduce government spending.

  2. Devalue the currency, decrease interest rates, and increase government spending.

  3. Appreciate the currency, increase interest rates, and reduce government spending.

  4. Appreciate the currency, decrease interest rates, and increase government spending.


Correct Option: A
Explanation:

The policy options available to a country to address a Current Account deficit are to devalue the currency, increase interest rates, and reduce government spending.

What are the policy options available to a country to address a Current Account surplus?

  1. Appreciate the currency, decrease interest rates, and increase government spending.

  2. Appreciate the currency, increase interest rates, and reduce government spending.

  3. Devalue the currency, decrease interest rates, and increase government spending.

  4. Devalue the currency, increase interest rates, and reduce government spending.


Correct Option: A
Explanation:

The policy options available to a country to address a Current Account surplus are to appreciate the currency, decrease interest rates, and increase government spending.

What is the relationship between the Current Account and the exchange rate?

  1. A Current Account deficit leads to a depreciation of the currency.

  2. A Current Account deficit leads to an appreciation of the currency.

  3. A Current Account surplus leads to a depreciation of the currency.

  4. A Current Account surplus leads to an appreciation of the currency.


Correct Option: A
Explanation:

A Current Account deficit leads to a depreciation of the currency.

What is the relationship between the Current Account and the interest rate?

  1. A higher interest rate leads to a Current Account deficit.

  2. A higher interest rate leads to a Current Account surplus.

  3. A lower interest rate leads to a Current Account deficit.

  4. A lower interest rate leads to a Current Account surplus.


Correct Option: A
Explanation:

A higher interest rate leads to a Current Account deficit.

What is the relationship between the Current Account and government spending?

  1. Higher government spending leads to a Current Account deficit.

  2. Higher government spending leads to a Current Account surplus.

  3. Lower government spending leads to a Current Account deficit.

  4. Lower government spending leads to a Current Account surplus.


Correct Option: A
Explanation:

Higher government spending leads to a Current Account deficit.

What are the implications of a Current Account deficit for a country's economic growth?

  1. It can lead to a slowdown in economic growth.

  2. It can lead to an acceleration in economic growth.

  3. It has no impact on economic growth.

  4. It can lead to a higher inflation rate.


Correct Option: A
Explanation:

A Current Account deficit can lead to a slowdown in economic growth.

What are the implications of a Current Account surplus for a country's economic growth?

  1. It can lead to an acceleration in economic growth.

  2. It can lead to a slowdown in economic growth.

  3. It has no impact on economic growth.

  4. It can lead to a higher inflation rate.


Correct Option: A
Explanation:

A Current Account surplus can lead to an acceleration in economic growth.

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