CBSE Class 12 Economics Government Open Economy Macroeconomic VBQs

Case Study Questions Open Economy Macroeconomics Class 12 Economics

Case based questions

After reading following Report/Case study give answers from question no. 1 to 3.
India, which uses 80% of imported crude oil for its requirements, imports around 10% of its crude oil requirement from Iran, the third largest supplier after Saudi Arabia and Iraq.
An agreement had been signed by the Indian and Iranian government on 2 November 2018 for oil payment in rupees and 50% of those funds had been earmarked for exports," according to an Indian government document reviewed by Reuters.
Oil payments are being made in rupees only as against earlier arrangements where there was a ratio of 45% rupees and 55% euros, the document said

Question: What is the impact of India-Iran contract of payment of oil in rupees?
(a) Forex reserve increase in India
(b) Forex reserve decrease in India
(c) Depreciation of rupee
(d) Both A and C 

Answer: A

Question: ________ is the second largest traded currency on the forex market.
(a) US dollar
(b) Indian Rupees
(c) Euro
(d) Yen 

Answer: C

Question: Which of the following is / are benefits of India-Iran agreement to India?
(a) Strengthening rupee in international market
(b) Help to boost trade with Iran
(c) Both A and B
(d) None of these

Answer: C

The rupee declined 18 paise to close at 74.36 against the US dollar on Wednesday, tracking strengthening American currency in the overseas market and higher crude prices. However, a strong rally in domestic equities and unabated foreign fund inflows restricted the slide of the domestic unit, forex traders said At the interbank foreign exchange market, the local currency opened on a weak note at 74.24 and swung between the day’s high of 74.18 and low of 74.50 to the US dollar.
The rupee finally settled at 74.36 against the greenback, down 18 paise over its last close. “Indian rupee depreciated amid strong dollar and surge in crude oil prices. Further, rupee slipped on worries over a slowdown in global economic recovery due to resurgence in COVID-19 cases. “India CPI data is likely to show that inflation remained above the Reserve Bank of India medium- term target range of 2-6 per cent.
India’s Industrial Production data forecasted to show factory output contracted for 7 consecutive month,”Mukadam sai(d) Source: 

Question: ____________ is the system of floating exchange rate with the occasional intervention by the RBI to influence the float or manage the float.
(a) Managed Floating
((b) Dirty Floating
(c) Both (a) & ((b)
(d) None of the above

Answer: C

Question: The rupee declined 18 paise means ___________ of rupee.
(a) Depreciation
(b) Appreciation
(c) Devaluation
(d) Revaluation 

Answer: A

Question: What is the full form of CPI?
(a) Current Price Index
(b) Crude Price Index
(c) Consumer Price Index
(d) None of the above

Answer: C

India’s trade deficit with China dips to $48.66 billion in 2019-20. In 2018-19, Exports to China in the last financial year stood at $18.9 billion, and the trade deficit stood at $53.56 billion. Chinese FDI has dipped to $163.78 million in 2019-20 from $229 million in the previous fiscal.

Question: “India’s trade deficit with China dips to $48.66 billion in 2019-20.” ___________ in imports from China has caused this.
(a) Increase
(b) Decrease
(c) No change
(d) None of the above

Answer: B

Question: What does “Trade Deficit” mean?
(a) The value of exports of goods and services is more than the value of imports of goods and services.
(b) The value of imports of merchandise is more than the value of exports of merchandise.
(c) Negative balance on account of trade in goods, services and transfers.
(d) Foreign exchange payments on account of invisible items are in excess over the receipts of invisible items.

Answer: B

Question: “Chinese FDI has dipped to $163.78 million in 2019-20 from $229 million in the previous fiscal.”
What will be its impact on BOP position of India?
(a) Favourable BOP position
(b) Adverse BOP position
(c) BOP equilibrium
(d) None of the above 

Answer: A

Question: How much was the Imports of goods from China in 2018-19?
(a) $53.56 billion
(b) $34.66 billion
(c) $48.66 billion
(d) $72.46 billion

Answer: D

Assertion and reasoning questions 

Question: Assertion (A): Current account records receipt and payment of foreign exchange on account of such transactions which do not impact asset liability status of a country in relation to rest of the worl(d)
Reason (R): Capital account records receipts and payments of such transactions which cause an impact on asset liability status of a country in relation to rest of the world .
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: B

Question: Assertion (A): Appreciation of domestic currency means a rise in the price of domestic currency.
Reason (R): Appreciation leads to increase in Exports.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: C

Question: Assertion (A): Managed floating exchange rate system is also called as ‘Dirty floating’.
Reason (R): Clean floating rate is influenced by the intervention of the central bank in the foreign exchange market.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) BothAssertion(A)andReason(R)are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: A

Question: Assertion (A): Balance of payment may improve better.
Reason (R): ‘Make in India’ will increase inflow of foreign exchange.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion(A) and Reason(R) are true and Reason (R) is not the correct explanation of Assertion(A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: A

Question:) Assertion (A): Balance of Payments may be adversely affecte(d)
Reason (R): Import of pulses is leading to outflow of foreign exchange.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) BothAssertion(A)andReason(R)are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: A

Question: Assertion (A) : Services trade includes both factor and non factor income.
Reasoning (R) : Invisibles include services, transfers, flows of income that take place between different countries.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d)  Assertion (A) is false but Reason (R) is true.

Answer: B

Question: Assertion (A) : A country always tries to balance the BOP i.e balance in current account equals to balance in capital account.
Reasoning ( R ) : Balance BOP indicates stable economic relation with rest of the world
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). 
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: A

Question: Assertion (A): Buying foreign goods is expenditure from our country and it becomes the income of that foreign country.
Reason (R): The purchase of foreign goods or imports decreases the domestic demand for goods and services in our country.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: A

Question: Assertion (A) : Rent received by an Indian real estate company from google in New York would be recorded on credit side of capital account.
Reasoning (R) : Capital account of BOP records all those transactions between residents of a country and rest of the world which causes a change in the assets or liabilities of the residents of the country or its government.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: D

Question: Assertion (A) : If an Indian buys a UK car company, it enters capital account transactions as a debit item
Reasoning (R) : Sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Answer: B