Balance of Payments and Exchange Rates - International Economics - Economics Previous Year Questions

1

2021 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences-Economics (XH-C1) 2021

If the sum of price elasticities of imports and exports of a country exceeds unity, then a depreciation of domestic currency will ultimately result in

A

contraction in trade deficit of the country

B

widening of trade deficit of the country

C

an uncertain net effect on the trade balance

D

a huge outflow of foreign portfolio capital from that country

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2

2022 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences-Economics (XH-C1) 2022

In the flexible exchange rate environment with perfect capital mobility, a fiscal stimulus will be linked to which of the following statements?

A

Fiscal policy increases the domestic outcome

B

Fiscal policy does not increase the domestic output

C

Fiscal policy leads domestic exports to fall

D

Fiscal policy appreciates the domestic currency

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3

2023 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences-Economics (XH-C1) 2023

A 250 ml bottle of mango juice costs USD 4 in the United States. If the exchange rate is 0.02 USD per Rupee, then the cost of the same bottle of mango juice in Rupees would be ______ (in integer).

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4

2023 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences-Economics (XH-C1) 2023

In the context of Balance of Payments accounting, which of the following transactions is/are NOT recorded under the Current Account?

A

Merchandise trade

B

Unilateral transfer payments

C

Purchase of international financial assets

D

Purchase of foreign currency by the central bank

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5

2024 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences-Economics (XH-C1) 2024

For a given foreign currency, if the forward exchange rate of delivery is 20 and the current value of spot exchange rate is 8, then the forward premium will be __________ (rounded off to two decimal places).

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6

2025 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences-Economics (XH-C1) 2025

Which of the following statements is/are CORRECT in the context of Foreign Exchange Market?

A

When the value of domestic currency increases vis-à-vis the value of foreign currency, the domestic currency experiences appreciation.

B

When the value of domestic currency increases vis-à-vis the value of foreign currency, the domestic currency experiences depreciation.

C

When the value of domestic currency decreases vis-à-vis the value of foreign currency, the domestic currency experiences depreciation.

D

When the value of domestic currency decreases vis-à-vis the value of foreign currency, the domestic currency experiences appreciation.

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7

2026 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences - Economics (XH-C1) 2026

Which one of the following combinations of simultaneous policy actions is NOT possible?

A

Country A allows full international capital mobility, conducts an independent monetary policy, and follows a floating exchange rate regime

B

Country A allows full international capital mobility, conducts an independent monetary policy, and follows a fixed exchange rate regime

C

Country A allows full international capital mobility, cannot conduct an independent monetary policy, and follows a fixed exchange rate regime

D

Country A does not allow full international capital mobility, conducts an independent monetary policy, and follows a fixed exchange rate regime

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8

2026 · Economics · International Economics · Balance of Payments and Exchange Rates

Humanities & Social Sciences - Economics (XH-C1) 2026

Nominal exchange rate is defined as the amount of domestic currency that can fetch one unit of foreign currency. Suppose that there is a fall in nominal exchange rate. Which of the following statements is/are TRUE?

A

Appreciation of domestic currency with respect to foreign currency

B

Depreciation of domestic currency with respect to foreign currency

C

Fall in the price of foreign currency in terms of domestic currency

D

Rise in the price of foreign currency in terms of domestic currency

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