1.. Widening Current Account Deficit (CAD) is a persistent problem for Indian economy. With reference to this, which of the following statements is/are correct?
- Current Account tracks the movement of funds for investments and loans into and out of a country.
- CAD may results into devaluation of currency.
- CAD is the difference between the country’s export earnings plus inward remittances minus imports and outward remittances.
Select the correct answer using the code given below.
(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1 and 2 only
2.. Consider the following statements:
- FDI is also known as “Hot Money” and “Fly by night” money.
- Tapering of Quantitative easing by the US Federal Reserves will lead to huge inflow of foreign exchange in emerging markets such as India.
- The government should protect strategic sectors from FDI.
Which of the above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) All of the above
(d) None of the above
3.. Consider the following statements:
- Depreciation refers to the fall in the value of rupee due to withdrawal of foreign capital from the economy.
- Devaluation is a deliberate effort by the Central Bank to bring down the value of rupee to boost earnings from exports.
Which of the above statement/statements is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 and 2
4.. Which of the following statements is/are true about Real effective exchange rate (REER)
- It is used to determine an individual country’s currency value relative to the other major currencies in the index, as adjusted for the effects of inflation.
- In India REER is calculated based on the WPI
- REER is considered to be a better indicator of international competitiveness than NEER.
(a) 1 and 2
(b) 2 and 3
( c) 1 and 3
(d) all of these.
5.. Under a floating exchange rate regime, an increase in the supply of foreign exchange results in:
(a) a depreciation of the domestic currency.
(b) an appreciation of the domestic currency.
(c) either an appreciation or a depreciation of the domestic currency.
(d) no change in the exchange rate.
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