UNIVERSITY OF CALICUT

SCHOOL OF DISTANCE EDUCATION

VI SEMESTER

B.A. ECONOMICS
MCQ

INTERNATIONAL ECONOMICS
Module I ,II

1.International trade contributes and increases the world _________

A. Population
B. Inflation
C. Economy
D. Trade Barriers
2. Free international trade maximizes world output through________.
A. Countries reducing various taxes imposed.
B. Countries specializing in production of goods they are best suited for.
C. Perfect competition between countries and other special regions
D. The diluting the international business laws & conditions between countries.
3. Domestic company limits it’s operations to ___________ political boundaries.
A. International
B. National
C. Transnational
D. Global
4. Trade between two or more than two countries is known as ________.
A. Internal Business
B. External Trade
C. International Trade
D. Unilateral Trade
5. _____refers to the tax imposed on imports.
A. Imported Tax
B. Tariffs
C. Subsidies
D. Import Quotas
6. _____ means selling the products at a price less than on going price in the market.
A. Quota
B. Tariff
C. Subsidy
D. Dumping
7. _______is the oldest International Trade theory.
A. Country Similarity Theory
B. Theory of Absolute Cost advantage
C. Product Life Cycle Theory
D. Mercantilism Theory
8. A voluntary export restraint is the opposite form of _____.
A. Import quotas
B. International tariffs
C. Subsidies
D. Dumping
9. ____ is a group of countries agree to abolish all trade restrictions and barriers.
A. Common market
B. Economic Union
C. Custom Union
D. Free Trade Area
10. EU stands for _____
A. Export Union
B. European Union
C. EXIM Union
D. Export Union
11. The abbreviation SAARC stands for _______
A. South American Association for Regional Cooperation
B. South African Association for Regional Cooperation
C. South ASEAN Association for Regional Cooperation
D. South Asian Association for Regional Cooperation
12. The full form of WTO is __________
A. World Tariff Organization
B. World Trade Organization
C. Western Trade Organization
D. World Transport Organization
13. ________was replaced by WTO on January 1, 1995.
A. NAFTA
B. IMF
C. IRDB
D. GATT
14. International Trade, Full form of NAFTA is ___________.
A. National American Free Trade Agreement
B. North Asian Free Trade Agreement
C. New Anti-Tariff Free Trade Agreement
D. North American Free Trade Agreement
15. ASEAN stands for ___________.
A. The Association of Southeast American Nations
B. The Association of Southeast Asian Nations
C. The Agreement of Southeast American Nations
D. The Agreement of Southeast Asian Nations
16. __________was established by a multilateral treaty of 23 countries in 1947.
A. WTO
B. UN
C. GATT
D. NAFTA
17. In International Trade, IMF stands for ___________.
A. International Monetary Fund
B. International Money Fund
C. International Market Fund
D. International Monetary Firm
18. An import tariff is a tax or duty levied on ___________ commodities.
A. Imported
B. Exported
C. Transported
D. Both A & B
19. An _____________ is a tax or duty levied on exported commodities.
A. Import Tariff
B. Export Tariff
C. Transport Tariff
D. Free Trade Tariff (FTT)
20. __________refers to purchase of goods from a foreign country.
A. Foreign Trade
B. Export Trade
C. Import Trade
D. EXIM Trade
21. _______is a fixed percentage on the value of the traded commodity.
A. Anti dumping duty
B. Specific tariff
C. Ad Valorem tariff
D. A compound tariff
22. In most countries, foreign trade represents a significant share of ______
A. EXIM
B. FDI
C. Income Per Capita
D. GDP
23. Cash grants, loans at low rate and tax holidays are examples of ______.
A. Quotas
B. Tarifs
C. Subsidies
D. Discounts
24. _________refers to the sale of goods to a foreign country.
A. Foreign Trade
B. Export Trade
C. Import Trade
D. EXIM Trade
25. _______is a combination of an ad valorem and specific tariff.
A. Anti dumping tariff
B. Specified Valorem Tariff
C. EXIM Tariff
D. A compound tariff
26. _______ refers to goods imported from one country and are exported to another country.
A. Third Party Trade
B. Entrepot trade
C. Export Trade
D. EXIM Trade
27. Theory of comparative advantage was presented by:
A. Adam Smith
B. Ricardo
C. Hicks
D. Arshad
28. Trade between two countries can be useful if cost ratios of goods are:
A. Equal
B. Different
C. Undetermined
D. Decreasing
29. Modern theory of international trade is based n the views of:
A. Robbins and Ricardo
B. Adam Smith and Marshall
C. Heckcsher and Ohlin
D. Saleem and Kareem
30. Net exports equal:
A. Exports x Imports
B. Exports + Imports
C. Exports - Imports
D. Exports of services only
31. A tariff:
A. Increases the volume of trade
B. Reduces the volume of trade
C. Has no effect on volume of trade
D. (a) and (c) of above
32. A tariff is:
A. A restriction on the number of export firms
B. Limit on the amount of imported goods
C. Tax and imports
D. (b) and (c) of above
33. Which of the following theories suggests that firms seek to penetrate new markets over
time?
A.Imperfect Market Theory
B.Product cycle theory
C. Theory of Comparative Advantage
D. None of the above
34.Dumping refers to:
A. Reducing tariffs
B. Sale of goods abroad at low a price, below their cost and price in home market
C. Buying goods at low prices abroad and selling at higher prices locally
D. Expensive goods selling for low prices
35. Hecksher-ohlin theorem states that a capital rich country
A. Exports Capital intensive goods
B. imports capital intensive goods
C. exports labour intensive goods
D. imports labour intensive goods
36. According to Ricardo, international trade is useful under ______
a) Absolute cost
b) comparative cost,
c) equal difference in cost,
d) Zero cost.
37. Ricardian theory assumes perfect mobility of labour______
a) Within the country,
b) between the countries,
c) both within and between the countries,
d) none of these.
38. Heckscher-Ohlin theory is about _______
a) inter-regional trade,
b) international trade,
c) domestic trade,
d) a and b both
39. According to Heckscher-Ohlin theory, product price depends on _______
a) Factor intensity,
b) factor abundance,
c) factor cost,
d) all of these.
40. A reciprocal demand is _______
a) Mutual demand of two countries to each other’s good
b) Mutual supply
c)Price of export and import
d ) Derived demand
41. An offer curve ________
a) Differs from usual demand curve only
b) Differs from usual supply curve only
c) same as usual demand curve
d) Differs from both demand and supply curves
42. International trade _______
a) Stimulates innovations,
b) Reduces cost of production
c)Diversifies consumption
d)All the above
43. Tariff is expressed as either a specific or an ad valorem rate, whichever is higher, is
known as__________
a) General Tariff,
b) Mixed Tariff,
c) Compound Tariff,
d) Countervailing Tariff
44. Which one of the following is not a Non-Tariff Barrier (NTB)?
a) Voluntary export restriction,
b) Local content requirement
c) Administrative barrier
d) Tariff rate quotas
45. The reduction in domestic consumption due to imposition of quota results in
a) Increase in government revenue,
b) Increase in consumer’s surplus
c) Loss of social welfare,
d) Increase in social welfare
46. The ASEAN was formed in ________
a) 1967,
b) 1945
c) 1999,
d) 2000
47. Graphical representation of reciprocal demand is referred to as_______
a) Offer curve,
b) Demand curve,
c) Supply curves,
d) Contract curve
48. The Protectionist Policy ________
a) Encourages international specialization,
b) Promotes global trade,
c) Prevents dumping
d) Reduces government’s interference in trade
49. ________ is/ are controversies in trade policy
a) Labour standards,
b) IPR,
c) Environment,
d) All of these
50. SAARC was formed in
a) 1995,
b)1985,
c) 1980,
d) 1990
51. Regional trade agreement is treaty signed by countries to____
a) Encourage free movement of goods and services across borders
b) Encourage free movement of goods and services within borders
c) Discourage free movement of goods and services across borders
d) None of the above
52. Trade is not possible if countries operate under____
a) Absolute cost difference
b) equal cost difference
c) Comparative cost difference
d) None of the above
53. Heckscher – Ohlin theory of International trade assumes ______ (Countries*
Commodities* factors of production)
a) 2*2*2
b) 2*2*1
c) 2*3*2
d) 3*2*2
54. When Leontief tested the predictions of the Heckscher-Ohlin theory, he found that in 1947
the United States was exporting relatively labor-intensive goods and importing relatively
capital-intensive goods. This was called the Leontief Paradox. This finding:
a. Justified the imposition of import tariffs on capital-intensive goods
b. Contradicted the Heckscher-Ohlin theory as the United States was relatively labor-abundant.
c. Fit the predictions of the Heckscher-Ohlin theory concerning the trading patterns of a capital-
abundant country.
d. Contradicted the Heckscher-Ohlin theory as the United States was relatively capital-
abundant.
55. When the value of a country’s currency rises relative to other world currencies, this is an
_______________ of the real exchange rate.
a. appreciation
b. depreciation
c. disinflation
d. stagnation
56. A company of the US has excess products that it does not want to sell into the US market
because it will bring down the domestic price and instead sells it at another country at below
the cost of production. What is this called?
a. Countervailing.
b. International trade
c. Dumping.
d. None of the above.
57. Which paradox is contradictory of H-O theory?
a. Samuelson paradox.
b. Leontief paradox.
c. Haberlar paradox.
d. Lerner paradox.
58. The Heckscher-Ohlin theory explains comparative advantage as the result of differences
in countries ?
a. Economies of large-scale production
b. Relative abundance of various resources
c. Relative costs of labor
d. Research and development expenditures
59. According to the factor endowment model of Heckscher and Ohlin, countries heavily
endowed with land will ?
a. Devote excessive amounts of resources to agricultural production
b. Devote insufficient amounts of resources to agricultural production
c. Export products that are land-intensive
d. Import products that are land-intensive
ANSWERS

1.c 11.d 21.c 31.b 41.d 51.a

2.b 12.b 22.d 32.b 42.d 52.b
3.b 13.d 23.c 33.b 43.b 53.a
4.c 14.d 24.b 34.b 44.d 54.d
5.b 15.b 25.d 35.a 45.c 55.a
6.d 16.c 26.b 36.b 46.a 56.c
7.d 17.a 27.b 37.a 47.a 57.b
8.a 18.a 28.b 38.d 48.c 58.b
9.d 19.b 29.c 39.d 49.d 59.c
10.b 20.c 30.c 40.a 50.b

Module III, IV,V

1. International finance is concerned with__________

A. exchange rates of currencies

B. monetary systems of the world
C. foreign direct investment
D. all of the above

2. International finance mainly discusses the issues related with monetary interactions of
at least__________.
A. one country
B. two or more countries
C. five countries
D. None of the above

3. ________ maintains the foreign exchange reserves in India?

A. State Bank of India
B. Reserve Bank of India
C. Finance Ministry of India
D. EXIM India

4. India’s foreign exchange rate system is _______

A. Fixed target of band
B. Free float
C. Fixed system
D. Managed float

5. India is facing continuous deficit in its balance of payments in the foreign exchange
market rupee is expected to _______
A. Appreciate
B. Depreciate
C. Show no specific tendency
D. All of the above
6. _____ is not a characteristic of speculation.
A. Hedging
B. Risk taking
C. Profit motive
D. Exchange rate fluctuation
7. The responsibility for administration of of FEMA is vested with ________
A. Central government
B. State government
C. RBI
D. National banks
8. A source of supply of foreign exchange is ________
A. Imports
B. Exports
C. Donations
D. Gifts
9. The foreign direct investment includes __________
A. tangible good
B. intangible good
C. intellectual property
D. human resources
10. More expansion of foreign direct investment can boost _______
A. demand
B. money circulation
C. employment
D. unemployment
11. Who determines foreign exchange rates in India?
A. RBI
B. FEDAI
C. market forces of demand and supply
D. finance ministry of India
12. Who regulates the foreign trade in India?
A. SEBI
B. FEDAI
C. RBI
D. DGFT
13. The statutory authority which administers the exchange control in India _____
A. RBI
B. ministry of commerce
C. DGFT
D. FEDAI
14. When did government remove the barrier for investment in India?
A. 1193
B. 1992
C. 1991
D. 1990
15. Which of the following is known as the paper gold?
A. Bitcoin
B. US dollar
C. demand draft
D. special drawing right
16. IMS is the full form of _________
A. International monetary source
B. International monetary system
C. International monetary structure
D. International monetary society
17. The world’s four major trading currencies are all free to float against each other. They
include all the following except.
A. The British Pound
B. The Japanese Yen
C. The Spanish Peso
D. The US Dollar
18. The term Euro currency Market refers to
A. The countries which have adopted Euro as their currency
B. The market in which Euro is exchanged for other currencies
C. The market where the borrowing and lending of currencies take place outside
the country of issue
D. The international foreign exchange market

19. The Bretton Woods System called for:

A. The IMF to promote development
B. Floating exchange rates against the Japanese Yen
C. Fixed exchange rates against the US Dollar
D. Floating exchange rates against US Dollar
20. The primary component of the current account is the.
A. balance of trade
B. balance of money market flows
C. balance of capital market flows
D. unilateral transfers

21. Type of risk in which value of liabilities and assets is affected by exchange rate is
classified as
A. economic rates
B. foreign exchange risk
C. selling rate
D. buying rates

22. Type of risk in which value of liabilities and assets is affected by exchange rate is
classified as
A. economic rates
B. foreign exchange risk
C. selling rate
D. buying rates

23. In the foreign exchange market, the ________ of one country is traded for the ________
of another country.
A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
24. By definition, currency appreciation occurs when
A. the value of all currencies fall relative to gold.
B. the value of all currencies rise relative to gold.
C. the value of one currency rises relative to another currency.
D. the value of one currency falls relative to another currency
25. Given a home country and a foreign country, purchasing power parity suggests that:
A. the home currency will appreciate if the current home inflation rate exceeds the
current foreign inflation rate;
B. the home currency will depreciate if the current home interest rate exceeds the
current foreign interest rate;
C. the home currency will depreciate if the current home inflation rate exceeds the
current foreign inflation rate.
D. the home currency will depreciate if the current home inflation rate exceeds the
current foreign interest rate;
26. If purchasing power parity were to hold even in the short run, then:
A. real exchange rates should tend to decrease over time;
B. quoted nominal exchange rates should be stable over time.
C. real exchange rates should tend to increase over time;
 D. real exchange rates should be stable over time;

27. Interest Rate Parity (IRP) implies that:

A. Interest rates should change by an equal amount but in the opposite direction to the
difference in inflation rates between two countries
B. The difference in interest rates in different currencies for securities of similar risk
and maturity should be consistent with the forward rate discount or premium for the
foreign currency
C. The interest rates between two countries start in equilibrium, any change in the
differential rate of inflation between the two countries tends to be offset over the
long-term by an equal but opposite change in the spot exchange rate
D. In the long run real interest rate between two countries will be equal

28. A forward currency transaction:

A. Is always at a premium over the spot rate
B. Means that delivery and payment must be made within one business day
(USA/Canada) or two business days after the transaction date
C. Calls for exchange in the future of currencies at an agreed rate of exchange
D. Sets the future date when delivery of a currency must be made at an unknown
spot exchange rate
29. If one anticipates that the pound sterling is going to appreciate against the US dollar,
one might speculate by _______ pound call options or ______ pound put options.
A. buying; buying
B. selling; buying
C. selling; selling
D. buying; selling
30. The exchange rate is the
A. total yearly amount of money changed from one country’s currency to another
country’s currency
B. total monetary value of exports minus imports
C. amount of country’s currency which can exchanged for one ounce of gold
D. price of one country’s currency in terms of another country’s currency
31. Exchange rates
A. are always fixed
B. fluctuate to equate the quantity of foreign exchange demanded with the quantity
supplied
C. fluctuate to equate imports and exports
D. fluctuate to equate rates of interest in various countries
32. An arbitrageur in foreign exchange is a person who
a) earns illegal profit by manipulating foreign exchange
b) causes differences in exchange rates in different geographic markets
c) simultaneously buys large amounts of a currency in one market and sell it in another
market
d) None of the above
33. A speculator in foreign exchange is a person who
 A. buys foreign currency, hoping to profit by selling it a higher exchange rate at
some later date
B. earns illegal profit by manipulation foreign exchange
C. causes differences in exchange rates in different geographic markets
D. None of the above
34. The Purchasing Power Parity (PPP) theory is a good predictor of
A. the long-run tendencies between changes in the price level and the exchange
rate of two countries
B. interest rate differentials between two countries when there are strong barriers
preventing trade between the two countries
C. either b or c
D. none of the above
35. According to the Purchasing Power Parity (PPP) theory,
A. Exchange rates between two national currencies will adjust daily to reflect price
level differences in the two countries
B. In the long run, inflation rates in different countries will equalize around the
world
C. In the long run, the exchange rates between two national currencies will reflect
price level differences in the two countries
D. None of the above
36. A floating exchange rate
A. is determined by the national governments involved
B. remains extremely stable over long periods of time
C. is determined by the actions of central banks
D. is allowed to vary according to market forces
37. Under a gold standard,
A. a nation’s currency can be traded for gold at a fixed rate
B. a nation’s central bank or monetary authority has absolute control over its
money supply
C. new discoveries of gold have no effect on money supply or prices
D. a & b
38. The Bretton Woods accord
A. of 1879 created the gold standard as the basis of international finance
B. of 1914 formulated a new international monetary system after the collapse of
the gold standard
C. of 1944 formulated a new international monetary system after the collapse of
the gold standard
D. None of the above
39. The current system of international finance is a
A. gold standard
B. fixed exchange rate system
C. floating exchange rate system
D. managed float exchange rate system
40. A simultaneous purchase and sale of foreign exchange for two different dates is called
A. currency devalue
 B. currency swap
C. currency valuation
D. currency exchange
41. More instability in currency is called as
A. country risk
B. financial risk
C. currency risk
D. liquidity risk
42. Largest number of buyers and sellers, greater the
A. liquidity
B. speculation
C. hedging
D. forward rate
43. Exchange rate entail delivery of trade currency within two business days know as
A. forward rate
B. future rate
C. spot rate
D. bid rate
44. Differences in nominal interest rates are removed in exchange rate is
A. fisher effect
B. Leontief paradox.
C. Combined equilibrium theory.
D. purchasing power parity
45. In 1944 international accord is recognized as
A. Breton Wood Agreement
B. Exchange Agreement
C. International Trade
D. Fisher Effect
46. Gold standard introduced in
A. 1913
B. 1990
C. 1876
D. 1944
47. Market in which currencies buy and sell and their prices settle on is called the
A. Eurocurrency market
B. international capital market
C. international bond market
D. foreign exchange market
48. Governments enforce currency limitations to
A. protect a currency from speculators
B. keep resident individuals and businesses from investing in other nations
C. preserve hard currencies to finance trade deficits or repay debts
D. all of above
49. The equation that shows the relationship between expected inflation, real interest
 rates, and nominal interest rates is called the
A. interest rate parity equation.
B. Fisher equation.
C. GDP deflator.
D. net inflation index.
50. When was IMF established?
A Dec. 27, 1945
B Jan. 30, 1947
C Jan.1, 1946
D Sept. 24, 1947
51. Balance of payments of a country includes:
A. Balance of trade
B. Capital receipts and payments
C. Saving and investment account
D. Both (a) and (b)
52. It helps countries to meet deficit in balance of payments:
A. IMF
B. WTO
C. World Bank
D. UNO
53. GATT stands for __________
A. general agreement on tariffs and trade

B. general agreement on transport and trade

C. general arrangement on tariffs and trade

D. general agreement on transport and trade
54. As per Smithsonian Agreement 1 ounce of gold = USD _
A. 30

B. 35

C. 36

D. 38

55. Satistical residue is a part of _______

A. errors and ommissions
B. current account
C. capital account
D. reserve account
56. Reserves are held in the following forms, except .
A. foreign currency
 B. gold
C. sdr
D. silver

57. SDR is an international reserve asset created by .

A. IMF
B. WTO
C. World Bank
D. IBRD
58. FDI in BOP is covered under .
A. official reserve account
B. current account
C. capital account
D. balancing items

59. Under Exchange rate system, there is no interference of monetary authorities to decide
exchange rate.
A. fixed
B. floating
C. mixed
D. pegged
60. Under Exchange rate system, value of currency is decided by the market forces of
demand and supply.
A. fixed
B. floating
C. mixed
D. pegged

61. Capital account convertibility of the Indian rupee implies

a) That the Indian rupee can be exchanged by authorized dealers for travel
b) That the Indian rupee can be exchanged for any major currency for the purpose of
trade in goods and services
c) That the Indian rupee can be exchanged for any major currency for the purpose of
trading in financial assets
d) None of the above
62. One of the important goals of the economic liberalization policy is to achieve high
convertibility of the Indian rupee. Which of the following is not a benefit of
convertibility ?
a) Convertibility of the rupee will stabilize its exchange value against major currencies
of the world.
b) It will attract more foreign capital inflow in India
c) It will help promote exports
d) It will discourage imports to India
63. Which of the following statements is correct with respect to the convertibility of Indian
rupee?
 a) It is convertible on capital account
b) It is convertible on current account
c) It is convertible both on current and capital account
d) None of the above
64. The Mundell-Fleming framework studies (A) _____ , (B) _________ economies in a
world with (C) _____ financial markets and (D) _____ capital mobility.
a) (A) small; (B) open; (C) integrated; (D) free
b) (A) large; (B) open; (C) integrated; (D) free
c) (A) small; (B) mercantilist; (C) integrated; (D) free
d) (A) large; (B) open; (C) restricted; (D) free

65. Multinational corporations ?

A. increase the transfer of technology between nations
B. make it harder to nations to foster activities of comparative advantage
C. always enjoy political harmony in nations where their subsidiaries operate
D. require governmental subsidies in order to conduct worldwide operations
66. Firms undertake multinational operations in order to ?
A. hire low-income workers
B. manufacture in nations they have difficult exporting to
C. obtain necessary factor inputs
D. All of the above
67. Which of the following 2 countries are not the participants of the euro zone?
A. Luxembourg, Malta
B. Denmark and the United Kingdom
C. Austria, Belgium
D. Slovenia, Spain
68. Where is the headquarters of the EU?
A. Belgium
B. Netherlands
C. Luxembourg
D. Greece
69. The J-curve effect refers to the observation that ?
A. GDP usually decreases before it increases after a currency depreciation
B. the trade balance usually gets worse before it improves after a currency
depreciation
C. the trade balance usually gets better before it gets worse after a currency
appreciation
D. GDP usually decreases before it increases after a currency appreciation
70. The most widely traded currency in the foreign exchange market is the ?
A. euro
B. Chinese Yuan
C. British pound
D. U.S dollar
71. Which one of the following is the SDR given by the IMF to its member countries?
a) Cold Money
b) Hot money
c) Paper Money
d) None of these
72. What is unilateral transfer in BOP?
a) Visible items
b) Invisible items
c) Gifts
d) Income receipts & payments
73. Foreign currency forward market is
a) An over the counter unorganized market
b) Organized market without trading
c) Organized listed market
d) Unorganized listed market
74. Interest-rate parity refers to the concept that, where market imperfections are few,
a) the same goods must sell for the same price across countries.
b) interest rates across countries will eventually be the same.
c) there is an offsetting relationship between interest rate differentials and differentials
in the forward spot exchange market.
d) there is an offsetting relationship provided by costs and revenues in similar market
Environments
75. Under fixed exchange rate system , the currency rate in the market is maintained
through
a) Rationing of foreign exchange
b) Official intervention
c) Centralizing all foreign exchange operations
d) None of the above
76. The statutory basis for administration of foreign exchange in India is?
a) Foreign Exchange Regulation Act, 1973
b) Foreign Exchange Management Act , 1999
c) Exchange control Manual
d) Conservation of Foreign Exchange & prevention of Smuggling Act.
77. According to the Purchasing Power Parity theory, the value of a currency should remain
constant in terms of what it can buy in different countries of
a. Bonds
b. Stocks
c. Goods
d. Labor
78. By definition, currency appreciation occurs when
a) the value of all currencies fall relative to gold.
b) the value of all currencies rise relative to gold.
c) the value of one currency rises relative to another currency.
d) the value of one currency falls relative to another currency.
79. If purchasing power parity were to hold even in the short run, then:
a) real exchange rates should tend to decrease over time;
b) quoted nominal exchange rates should be stable over time.
c) real exchange rates should tend to increase over time;
d) real exchange rates should be stable over time;
80. The date of settlement for a foreign exchange transaction is referred to as:
a) Clearing date
b) Swap date
c) Maturity date
d) Value date
81. Foreign currency forward market is
a) An over the counter unorganized market
b) Organized market without trading
c)Organized listed market
d) Unorganized listed market
82. Forward exchange rates are useful for those who wish to
a. Protect themselves from the risk that the exchange rate will change before a
transaction is completed.
b. Gamble that a currency will rise in value or will fall in value
c. Exchange currencies at a point in time in the future.
d. All of the above.
83. The feature of currency option is that distinguishes it from other derivatives is
a) It carries premium to be paid upfront
b) It is optional to enter into the contract
c) The buyer has only right but no obligation to execute the contract
d) The seller has the right but no obligation to execute the contract
84. An investor looking at reducing his risk is known as ______.
A. Speculator
B. Hedger
C. Arbitrageur
D. Trader
85. ______ frames rules and guidelines for Forex Business in India
A. RBI
B. SEBI
C. IRDA
D. FEDAI
86. _______ was introduced at a time when forex reserves of the country were low.
A. FERA
B. FEMA
C. GATT
D. EXIM
87. _______ can authorize a person/company to deal in foreign exchange.
A. SEBI
B. RBI
 C. IRDA
D. Parliament
88. Systematic record of economic transactions of a country during given period of time is
known as _______.
A. ADR
B. BOP
C. GDR
D. IFRS
89. In quote of 1 USD = INR 60, _______ is a home country
A. India
B. USA
C. France
D. Russia
90. A country may link its exchange rate to the value of a major currency, usually the U.S.
dollar or the French franc. This is called .
A. a currency par
B. a currency peg
C. a currency composite
D. a currency basket
91. Economists regard the creation of the Euro as a new European currency in the
international monetary system as the most important development since .
A. 1953
B. 1963
C. 1973
D. 1983
92. The decline of the U.S. dollar value in the late 1980s was mainly attributable to the
following agreement .
A. Louvre Accord
B. Plaza Accord
C. Smithsonian Agreement
D. Jamaica Agreement
93. The euro began public circulation in ____.
A. 1999
B. 2000
C. 2001
D. 2002
94. The positive effects of the introduction of the euro include:
A. It eliminates exchange rate risk between euro-zone countries.
B. It increases both inflation and government spending.
C. It facilitates cross-border prices comparisons.
D. A and C.
95. The managed floating exchange system was established in .
A. 1969
B. 1973
C. 1976
D. 1979
96. Factors that cause demand and supply schedules for foreign exchange to shift include:
A. relative inflation rates
B. relative interest rates
C. different welfare systems
D. relative income levels
97. The objectives of the International Monetary Fund (IMF) are .
A. to promote international monetary cooperation
B. to promote exchange stability
C. to create standby reserves
D. all of the above
98. The quota allotted to a member country of the IMF, which it can borrow at will, is
known as tranche.
a. gold
b. basic
c. member
d. reserve .
99. The proposal under which a par value of a currency is adjusted intermittently is referred
to as a .
A. wide band
B. narrow band
C. crawling peg
D. crawling band
100. Special drawing rights are used to settle payments by the following
organizations except
A. IMF member countries
B. prescribed organizations
C. central banks
D. multinational corporations
 ANSWERS

1.D 21.B 41.B 61.C 81.A

2.B 22.B 42.A 62.D 82.D
3.B 23.A 43.C 63.B 83.C
4.D 24.C 44.A 64.A 84.B
5.B 25.C 45.A 65.A 85.D
6.A 26.D 46.C 66.D 86.A
7.C 27.B 47.D 67.B 87.B
8.B 28.C 48.D 68.A 88.B
9.A 29.D 49.B 69.B 89.A
10.C 30.D 50.A 70.D 90.D
11.C 31.B 51.D 71.C 91.C
12.C 32.B 52.A 72.C 92.B
13.A 33.A 53.A 73.A 93.D
14.C 34.A 54.D 74.C 94.D
15.D 35.C 55.A 75.B 95.B
16.B 36.D 56.D 76.B 96.C
17.C 37.A 57.A 77.C 97.D
18.C 38.C 58.C 78.C 98.D
19.C 39.D 59.B 79.D 99.C
20.A 40.B 60.B 80.D 100.D

Prepared by:
Dr. SHIMA K M
Assistant Professor, SDE,
University of Calicut