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Bank Exam - Banking Awareness - Industrial Development and Foreign Trade Model Question Paper

Banking Awareness - Industrial Development and Foreign Trade

Exam Duration: 45 Mins Total Questions : 30

1 )

Foreign Direct Investment (FDI) is investment directly into production in a country by a company located in another country, then which one of the following modes is correct about the FDI?

(a)
Buying a company in the target country
(b)
Expanding operations of an existing business in that country
(c)
Investing in the shares and stocks of a company in the target country
(d)
Both '1' and '2'.
(e)
Neither '1' nor '2'

2 )

Which one of the following factors is taken into account to calculate the Balance of Payment (BoP) of a country?

(a)
Current account
(b)
Changes in the foreign exchange
(c)
Errors and omissions
(d)
All of these
(e)
None of these

3 )

BoP (Balance of Payment) refers to

(a)
Transaction in the flow of capital
(b)
Transactions relating to receipts and payment of invisible
(c)
Transactions relating only to exports and imports
(d)
Systematic record of all its economic transaction with the rest of the world
(e)
All of the above

4 )

Consider the following statements
I. Nominal Effective Exchange Rate (NEER) is the weighted average of bilateral exchange rate of the home currency in the terms of foreign currencies.
II. Real Effective Exchange Rate (REER) is used to measure the movements of exchange rate as well as inflation differentials between India and its major trading partners.
Which of the statements given is/are correct?

(a)
Only I
(b)
Only II
(c)
Both I and II
(d)
Neither I nor II
(e)
Either I or II

5 )

Which of the following is the component of India's Foreign Exchange Reserve?

(a)
Special drawing rights
(b)
Reserve tranche position of India in IMF
(c)
Indian currency held by foreign countries
(d)
Both '1' and '2'
(e)
Neither '1' nor '2'

6 )

All of the following are useful options for the government to pursue to bolster foreign exchange reserves, except to

(a)
Impose exchange controls
(b)
Impose export controls
(c)
Adjust the exchange rate
(d)
Barrow foreign currencies
(e)
Permit a free floating exchange rate

7 )

The balance of international indebtedness is a record of a country's international

(a)
Investment position over a period of time
(b)
Investment position at a fixed point in time
(c)
Trade position over a period of time
(d)
Trade position at fixed point in time
(e)
None of the above

8 )

Which of the following is considered as a capital inflow?

(a)
A sale of US financial assets to a foreign buyer
(b)
A loan from a US bank to a foreign borrower
(c)
A purchase of foreign financial assets by a US buyer
(d)
A U S citizen's repayment of a loan from a foreign bank
(e)
None of the above

9 )

Which balance of payments item does not directly enter into the calculation of the US gross domestic product?

(a)
Merchandise import
(b)
Shipping and transportation receipts
(c)
Direct foreign investment
(d)
Service exports
(e)
All of the above

10 )

On the balance of payments statements, merchandise imports are classified in the

(a)
Current account
(b)
Capital account
(c)
Unilateral transfer account
(d)
Official settlements account
(e)
None of the above

11 )

Which one of the following is the investment in securities that is intended for financial gain only and does not create a lasting interest in or effective management control over an enterprise?

(a)
Foreign direct investment
(b)
Portfolio investment
(c)
Equity direct investment
(d)
Both '1' and '3'
(e)
None of the above

12 )

Inward remittances by foreign steamship and airlines companies to finance their operating expenses in the country are shown under

(a)
The credit side of the current account of balance of payment
(b)
The debit side of the current account of balance of payment
(c)
The credit side of the capital/account of balance of payment
(d)
The debit side of the capital account of balance of payment
(e)
None of the above

13 )

At present, the trade between India and China is in a state of 'payment imbalance', what does this mean in real terms?
I.China does not import many items from India whereas India imports more from China.
II. China does not pay India in time and a lot of delay is reported by the exporters.
III. India wants all payments to be made in US dollars areas China pays in its own currency.
Which of the statements given above is/are correct?

(a)
Only I
(b)
Only II
(c)
Only III
(d)
All of the above
(e)
None of the above

14 )

Balance of trade of a country is equivalent to

(a)
Difference between the inward and outward remittances made in foreign exchange
(b)
Surplus generated shown in a trading account
(c)
Different between exports and imports
(d)
All of the above
(e)
None of the above

15 )

With regard to the Export Policy of the Government of India, which of the following statements is correct?

(a)
All commodities can be exported without license
(b)
Export licenses are required for only a few items
(c)
Export licenses are required for all items
(d)
All the above
(e)
None of the above

16 )

In India, which of the following agencies is responsible for announcing the Foreign Trade Policy?

(a)
RBI
(b)
EXIM Bank
(c)
Foreign Ministry
(d)
Industry and Commerce Ministry
(e)
None of the above

17 )

What is the full form of 'EPZ'?

(a)
Economical Plus Zone
(b)
Entertainment Plus Zone
(c)
Export Promotion Zone
(d)
Electronic Promotion Zone
(e)
None of the above

18 )

Some countries may not worry about an unfavorable balance on current account because

(a)
They know they can always borrow to cover the deficit
(b)
They import capital goods to build up exports industries that will eventually, eliminate the deficit
(c)
Deficits are always a stimulant to economic growth. which is a higher priority
(d)
They can if necessary, fix the exchange rate to wipe out the deficit
(e)
Their capital account will be favorable since the balance of payments always ends up at zero

19 )

A potential problem with free floating exchange rates is that

(a)
People who practice arbitrage may gain from the losses of others
(b)
Uncertainty in exchange rate fluctuations may hinder international trade
(c)
Exchange rates may never reach equilibrium
(d)
The currency markets may become monopolized
(e)
Less developed countries may issue too much currency

20 )

The balance of trade is given by

(a)
Income receipt minus income payments on investment
(b)
The balance of unilateral transfers
(c)
Merchandise exports plus service exports minus the sum of merchandise and service imports
(d)
Merchandise exports minus merchandise imports
(e)
The balance on current account

21 )

The foreign trade policy announced in the year 2004 was announced for a period of

(a)
Two years
(b)
Three years
(c)
Four years
(d)
Five years
(e)
Ten years

22 )

Debt service refers to

(a)
Interest payments on international debt as a percentage of a nation' merchandise exports
(b)
The outflows from a nation's capital account to pay for its imports of foreign services
(c)
The outflows from a nation's current account to pay for its import of foreign services
(d)
Debt owed to a nation for the export of its services
(e)
International debt representing all the services on all nation's balance of payments accounts

23 )

Which one of the following percentages is the share of the Indian export in the international trade?

(a)
Less than 1%
(b)
More than 1%, but less than 3%
(c)
More than 3%, but less than 5%
(d)
More than 5%, but less than 7%
(e)
More than 8%

24 )

The balance on current account includes all of the following items except

(a)
Merchandise exports minus merchandise imports
(b)
Exports of services minus imports of services
(c)
Income receipts minus income payments on investment
(d)
Changes in US assets owned abroad and foreign assets owned in the US
(e)
Unilateral transfers of currency by individuals

25 )

In an economy's Balance of Payment account,

(a)
The capital and currency accounts must add to one
(b)
The current account is always greater than the capital account
(c)
Both the balance on current account and the balance on capital account are zero
(d)
The capital plus current account balances must equal zero
(e)
Capital outflows must equal capital inflows

26 )

Floating exchange rates refers to

(a)
The ability of exchange rates to even out when displaced by shocks to the foreign exchange market
(b)
New issue of foreign exchange offered on the market
(c)
An exchange rate determined by the demand for and supply of a nation's currency
(d)
An excess demand for a nation's currency that causes its devaluation
(e)
An excess supply of a nation's currency that causes its appreciation

27 )

People who practice arbitrage will create mutually consistent exchange rates if

(a)
They operate in a country that practices exchange controls
(b)
Exchange rates are set properly by government
(c)
Productivity increases in the economy of the country whose currency is being traded
(d)
They buy a currency in one market at a low price and then sell at a high price in another market
(e)
The currency being traded appreciates

28 )

We very frequently read about the activities of the Foreign Exchange Market in newspapers/magazines. Which of the following is/are the major function of the same?
I. Transfer of purchasing power from domestic to foreign market
II. Providing credit for financing foreign trade
III. Power to purchase gold from foreign countries, as most of the nations still work on Gold Standards.

(a)
Only I
(b)
Only II
(c)
Only III
(d)
Both I and II
(e)
Both II and III

29 )

As per the RBI, the economic conditions in India are not yet suitable for full convertibility of Rupees, At present Rupees convertible at which of the following accounts?
I. Fully at Capital Account
II. Fully at Current Account
III. Partially at Trade Account

(a)
Only I
(b)
Only II
(c)
Only III
(d)
Only II and III
(e)
None of these

30 )

Consider the following items
I. Gems and jewellery
II. Chemicals and related products
III. Engineering goods
IV. Textiles
Which of the items given above are the top items in India's manufactured exports?