Rigorous Economics Balance Of Payments Test - 73+ MCQs: Economics - Balance of Payments Quiz: Test Your Understanding with Key Questions and Answers

1. What does the term 'invisible trade' refer to in the context of balance of payments?

Trade in services

Illegal trade activities

Undocumented trade transactions

Trade in intangible assets

2. How do capital inflows impact a country's balance of payments?

They contribute to a trade deficit

They usually have no impact on the balance of payments

They lead to currency devaluation

They strengthen the balance of payments

3. How does a country's central bank intervention impact the balance of payments?

It usually has no impact on the balance of payments

It contributes to currency appreciation

It leads to currency devaluation

It influences the official reserve transactions balance

4. Discuss the concept of 'Nixon Shock' and its impact on the international monetary system and balance of payments.

It usually has no impact on the international monetary system

It contributes to currency appreciation

It leads to a trade deficit

It involves the abandonment of the gold standard by the United States

5. Examine the 'Rogoff's Paradox of Perfect Capital Mobility' and its implications for monetary policy and the balance of payments.

It usually has no impact on monetary policy

It contributes to currency appreciation

It leads to a trade deficit

It involves the challenge of implementing effective monetary policy under perfect capital mobility

6. Discuss the 'Samaritan's Dilemma' and its relevance to foreign aid, economic development, and the balance of payments.

It usually has no impact on foreign aid

It contributes to currency appreciation

It leads to a trade deficit

It involves the challenge of providing aid without creating dependency

7. What are Special Drawing Rights (SDRs) in the context of the balance of payments?

International currency used for trade

Reserve assets created by the International Monetary Fund (IMF)

Bilateral trade agreements between countries

Credit facilities provided by the World Bank

8. Explain the 'Impossible Trinity' and its impact on a country's balance of payments.

It usually has no impact on the balance of payments

It contributes to currency appreciation

It leads to a trade deficit

It involves the incompatibility of fixed exchange rates, free capital movement, and an independent monetary policy

9. Discuss the role of the 'Real Effective Exchange Rate (REER)' in assessing a country's competitiveness and its impact on the balance of payments.

It usually has no impact on a country's competitiveness

It contributes to currency appreciation

It leads to a trade deficit

It measures the competitiveness of a country's goods and services in international markets

10. Discuss the 'Phillips Curve' and its implications for economic policy and the balance of payments.

It usually has no impact on economic policy

It contributes to currency appreciation

It leads to a trade deficit

It illustrates the trade-off between inflation and unemployment

Economics - Balance of Payments MCQ Test 5