MCQ Economics Class 12 Ch 6 Open Economy Macroeconomics

Macroeconomics

MCQ’s For All Chapters – Macroeconomics Class 12th

1. What is an open economy?

An economy that has no foreign trade

An economy that interacts with other countries through various channels

An economy that produces only domestic goods

An economy that does not use money

Question 1 of 20

2. Which of the following is a channel through which an economy establishes international linkages?

Output market

Household market

Agricultural market

Local market

Question 2 of 20

3. What happens to aggregate demand when Indians buy foreign goods?

It increases automatically

It remains unchanged

It decreases because spending escapes as a leakage

It becomes equal to exports

Question 3 of 20

4. What is the foreign exchange rate?

The price of one currency in terms of another currency

The price of domestic goods only

The rate of domestic taxation

The price of gold in a country

Question 4 of 20

5. What does the Balance of Payments record?

Only government expenditure

Only domestic production

Transactions in goods, services and assets between residents of a country and the rest of the world

Only imports of goods

Question 5 of 20

6. Which two accounts are included in the traditional classification of the Balance of Payments?

Revenue account and expenditure account

Current account and capital account

Savings account and investment account

Trade account and tax account

Question 6 of 20

7. Which of the following is included in the current account?

Purchase of shares in a foreign company

Government borrowing from abroad

Trade in goods and services and transfer payments

Purchase of foreign bonds

Question 7 of 20

8. When a country exports more goods than it imports, what occurs?

Trade deficit

Trade surplus

Capital deficit

Current account deficit

Question 8 of 20

9. What does the capital account record?

International transactions of assets

Domestic consumption

Household savings only

Government taxation

Question 9 of 20

10. How is a current account deficit generally financed?

Only through higher consumption

Through a capital account surplus

Through lower exports

Through a trade surplus only

Question 10 of 20

11. What are autonomous transactions?

Transactions made to bridge a Balance of Payments gap

Transactions independent of the state of the Balance of Payments

Transactions made only by the central bank

Transactions involving only government reserves

Question 11 of 20

12. What are accommodating transactions?

Transactions determined by the gap in the Balance of Payments

Transactions made only for earning profits

Transactions unrelated to international payments

Transactions involving only exports

Question 12 of 20

13. Which market is responsible for trading national currencies for one another?

Capital market

Labour market

Foreign exchange market

Commodity market

Question 13 of 20

14. Which of the following is a reason for demanding foreign exchange?

Purchasing goods and services from other countries

Reducing domestic production

Increasing domestic taxation

Decreasing government spending

Question 14 of 20

15. Under a flexible exchange rate system, how is the exchange rate determined?

Only by the government

By the market forces of demand and supply

Only by commercial banks

By a fixed quantity of gold

Question 15 of 20

16. What is depreciation of the domestic currency under a flexible exchange rate system?

A fall in the price of foreign currency in domestic currency

An increase in the value of domestic currency

An increase in the price of foreign currency in terms of domestic currency

A government decision to reduce taxes

Question 16 of 20

17. What does the Purchasing Power Parity theory suggest about exchange rates in the long run?

Exchange rates should reflect differences in price levels between countries

Exchange rates must always remain fixed

Exchange rates are determined only by gold reserves

Exchange rates are unrelated to prices

Question 17 of 20

18. What is devaluation in a fixed exchange rate system?

A government action that decreases the exchange rate and makes domestic currency costlier

A government action that increases the exchange rate and makes domestic currency cheaper

A market-driven rise in domestic currency value

A fall in foreign demand for domestic goods

Question 18 of 20

19. What is the main feature of a managed floating exchange rate system?

Exchange rates are permanently fixed by law

Central banks never participate in the foreign exchange market

Central banks intervene to moderate exchange rate movements

All currencies are converted into gold at fixed prices

Question 19 of 20

20. Why is the open economy multiplier smaller than the closed economy multiplier?

Because exports are always zero

Because government spending has no effect

Because a part of domestic demand falls on foreign goods

Because imports increase domestic income directly

Question 20 of 20

Macroeconomics

Leave a Reply Cancel reply

CBSE Board English Medium

CBSE Board Hindi Medium

बिहार बोर्ड

उत्तर प्रदेश बोर्ड

महाराष्ट्र बोर्ड

मध्य प्रदेश बोर्ड

ગુજરાત બોર્ડ

PSC Exam Preparation