Test 12

Fill in the Blanks

1. First Five Year Plan of ________________ (country) commenced in the year 1956.
2. ______ Account balance includes the Balance of Trade as well as balance on invisibles.
3. Balance of payments is achieved when the net value of all the receipts and payments is
________. (Zero/Positive)
4. Export and import of capital goods is not included in the______ Account of Balance of
Payments.
5. ______ policy introduced in China in the late 1970s had successfully reduced the growth
rate of population.

True or False – Correct the False Statements

6. Trade of invisible items is a part of capital account of BOP.
7. Until the 1980s, more than 80 per cent of the people in China were dependent on farming.
8. Balance of payments is balanced through unilateral transfers.
9. Borrowings from abroad are recorded in the capital account of balance of payments on
the debit side.
10. ‘The official reserve transactions are taken as accommodating items in balance of
payment.’

Assertion and Reasoning

11. Assertion: In both the accounting and the economic sense, Balance of Payment account
is always in balance.
Reason: In accounting sense, Balance of Payment account is prepared on the basis of
double entry system.
12. Assertion: External Assistance is recorded in the Current Account of the Balance of
Payments of a nation.
Reason: External Assistance includes bilateral and multilateral loans received/extended
by a nation.
13. Assertion: Balance of Trade includes only merchandise transactions.
Reason: Unfavourable Balance of Payments can be met out of favorable Balance of
Trade.
14. Assertion: The Balance of Payment is in surplus if autonomous receipts are greater than
autonomous payments.
Reason: Autonomous transactions are determined by the difference in the Balance of
Payments.
15. Assertion: The aim of the great leap forward campaign initiated in China was to transform
agrarian economy into a modern economy through rapid industrialization.
Reason: Under the great leap forward campaign students and professionals were sent to
work and learn from the countryside.
16. Assertion: Lower child mortality rate is a better indicator of gender equality.
Reason: Preference for a male child exists in China, Pakistan and India.
MCQ
17. Gifts and remittances sent abroad are recorded on the ______ side of the _____ account
in BOP.
a. Debit; Current.
b. Credit; Current.
c. Credit; Capital.
a. Debit; Capital
18. Read the given text carefully: “The Government has now decided to further promote the
development of mutual funds by throwing the field open to the private sector and joint
sector mutual funds. In order to safeguard the interests of the investing public, and to
encourage a healthy growth of the capital markets, a comprehensive set of guidelines is
being evolved for the operation of all mutual funds.”
Source: https://www.indiabudget.gov.in/doc/bspeech/bs199192.pdf (Budget 1991-92
Speech of Shri Manmohan Singh Minister of Finance) Identify the sector under which the
aforesaid reform was introduced and choose the correct option.
a. Industrial
b. Financial
c. Tax
d. Foreign Trade
19. Read the following statements carefully and choose the correct alternative from the
following:
Statement I – Great Leap Forward (GLF) campaign met with many problems like severe
drought, conflict with Russia etc.
Statement II – Under agricultural reforms, commune lands were allocated to individual
households for ownership, who were allowed to keep all post-tax income..
a. Both statements are false.
b. Statement I is true, and Statement II is false.
c. Statement I is false, and Statement II is true.
d. Both statements are true
20. Read the following Statements and choose the correct alternative:
Statement I: Unilateral transfers are also known as unrequited transfers.
Statement II: Receipt of unilateral transfers from the rest of the world is shown on the
credit side of capital account.
a. Both statements are true.
b. Both statements are false.
c. Statement I is true, and statement II is false.
a. Statement II is true, and statement I is false
21. Surplus in BOP arises when:
a. Autonomous payments > Autonomous receipts.
b. Accommodating receipts > Accommodating payments.
c. Accommodating payments > Accommodating receipts.
d. Autonomous receipts > Autonomous payments
22. On the basis of the given chart Choose the correct alternative:
 Trade Invisible
+ = ?
Balance Balance
a. Visible balance.
b. Current account balance.
c. Capital account balance.
d. None of the above

Answer According to Marks

23. Read the news headline given below and answer the following question: (1 Mark)
Sales of large high end refrigerators, many of which are imported, have been growing
rapidly, especially during the COVID-19 pandemic as people stayed indoors. Those
imports account for roughly 5% to 6% of total India sales.
Source Business India.
In the light of the above statement, state in which account will import of all refrigerators to
India will fall?

24. State a bad effect associated with the growth strategy followed by India prior to 1990. (1
Mark)
25. Why are exports entered as positive items in the balance of payment account? (1 Mark)
26. Calculate the value of imports when the Balance of Trade is ₹(-)400 crores and the value
of exports is ₹300 crores. (1 Mark)
27. Railways during the British rule in India promoted colonial exploitation of the Indian
economy. Justify. (2 Marks)
28. Balance of payment always balances. Does it mean a situation of 0 net financial obligation
for a country? (2 Marks)
29. Industrialization leads to structural shift in the economy. Justify. (2 Marks)
30. Balance of Trade shows a surplus of ₹500 crores and import of goods is 3/4 of the export
of goods. Determine the value of export of goods. (2 Marks)
31. Analyze the given image and state the type of investment (FII or FDI) shown in it. Also
mention in which sub account and on which side of view OP account will this be recorded
and why? (3 Marks)
 32. Should a current account deficit be a cause for alarm? Explain. (3 Marks)
33. ‘India, China and Pakistan have travelled more than 7 decades of developmental path with
varied results.’ Explain the given statement with valued arguments. (3 Marks)
34. ‘The overall picture of the Pakistan economy has been discouraging after the
implementation of reforms introduced in 1988. The economic slowdown has gripped the
Pakistan economy like never before.’ Do you agree with the given statement? Support
your reasoning with valid reasons. (4 Marks)
35. Explain ‘Growth with Equity’ as a planning objective. (4 Marks)
36. Reliance on public sector enterprises in five year plans was a tactical mistake. Do you
agree with this view? (4 Marks)
37. What are official reserve transactions? Explain their importance in the balance of
payments. (6 Marks)

Numerical
38. Export of goods: Import of goods = 2:1
BOT = ₹10,000 Crores Favorable.
Find export of goods.

39. Read the given amounts of transactions and answer the given questions: (All Amounts
in ₹ Crores)
BOT = 500 (Favourable)
Export of services = 200
BOP (Current Account) = 900 (Favourable)
Import of Services = 100
Unilateral transfer paid = 150
Find:
i. BOI
ii. Unilateral Transfers Received.