MCQs For NCERT Class 12 Economics Chapter 12 Open Economy

Students can refer to the following Open Economy MCQ Questions Class 12 Economics with answers provided below. The Multiple Choice Questions have been designed by the best Economics teachers for Class 12. You should also refer to MCQ Questions for Class 12 Economics given on our website for all chapters.

Open Economy MCQ Questions Class 12 Economics

Please go through the below Open Economy MCQ Questions Class 12 Economics. Please put your questions in the comments section so that our teachers and provide you an answer.

Question. By exchange rate we mean:
(a) How much local currency we have to pay for a foreign currency
(b) How much of a foreign currency we have to pay for another foreign currency
(c) The rate at which foreign currency is bought and sold
(d) All of these

Question. When there is unfavourable balance of trade?
(a) X > M
(b) X = M
(c) X < M
(d) None of these

Question. Which one is a merit of the flexible exchange rate?
(a) Simple System
(b) Continuous Adjustments
(c) Improves Balance of Payments
(d) All the above

Question. The forms of foreign exchange market is/are:
(a) Spot market
(b) Forward market
(c) Both (a) and (b)
(d) None of these

Question. What is the cause of the devaluation of any country’s currency?
(a) Increase in the domestic inflation rate
(b) Domestic real interest rates are less than foreign interest rates
(c) Much increase in the income
(d) All of these

Question. The market where the national currencies are traded for one another is known as ________
(a) Domestic exchange market
(b) Foreign exchange market
(c) Bazaar
(d) Shop

Question. Point out a merit of fixed exchange rate 
(a) None 
(b) Ensures supply of the fixed exchange rate 
(c) Ensures demand for the fixed exchange rate
(d) Ensures stability of the fixed exchange rate

Question. The amount of rupees required to buy one US$ is known as ………….
(a) Rupee dollar exchange rate
(b) Dollar rupee exchange rate
(c Real exchange rate
(d) Real effective exchange rate

Question. WTO was formed in?
(a) 1948
(b) 1964
(c) 1991
(d) 1995

Question. Which of the following is a demerit of the fixed exchange rate?
(a) Promotes the objectives of free markets
(b) Ensures the supply of the fixed exchange rate
(c) Contradicts the objectives of free markets
(d) None

Question. Which among the following is a source of demand for foreign exchange?
(a) Brokerage of goods and services
(b) Smuggle of goods and services
(c) Export of goods and services
(d) Import of goods and services

Question. Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called:
(a) Current transactions
(b) Capital transactions
(c) Autonomous transactions
(d) Accommodating transactions

Question. Foreign exchange rate of a country is the
(a) price of a foreign good in terms of the domestic good
(b) price of a foreign trade in terms of the domestic trade
(c) price of a foreign factor in terms of the domestic factor
(d) price of a foreign good in terms of the domestic currency

Question. When was the gold standard abandoned?
(a) 1930’s
(b) 1920’s
(c) 1940’s
(d) 1950’s

Question. The trade of visible and invisible items is known as _
(a) Balance of Payments
(b) Balance of Trade
(c) Deficit of interest
(d) Profit

Question. Which of the following is true?
(a) Fixed exchange rate is determined by the government
(b) Flexible exchange rate is determined by market forces (demand and supply of foreign exchange)
(c) Both (a) and (b)
(d) None of the above

Question. A deficit in balance of trade indicates
(a) That the imports of good are equal to the exports
(b) None of the above
(c) That the imports of good are less than the exports
(d) That the imports of good are greater than the exports

Question. Types of Foreign Exchange Market are :
(a) Spot market
(b) Forward market
(c) Both (a) and (b)
(d) None of these.