Balance of Payments — Class 12 Economics PYQs

In the context of Current Account transactions of Balance of Payment, identify the incorrect statement from the following :
(Choose the correct option)
Options :
(A) Export of goods and services are recorded as credit items.
(B) Import of goods and services are recorded as debit items.
(C) All transfer payments are recorded as debit items.
(D) All transfer receipts are recorded as debit items.

Read the following statements carefully :
Statement-1 : Managed floating exchange rate system is an amalgamation of fixed and flexible exchange rate system.
Statement-2 : Managed floating exchange rate system is also known as 'hybrid system'.
In the light of the given statements, choose the correct option from the following :
(A) Statement 1 is true and Statement 2 is false.
(B) Statement 1 is false and Statement 2 is true.
(C) Both Statements 1 and 2 are true.
(D) Both Statements 1 and 2 are false.

If a country exports goods worth of ₹ 600 crores and imports goods worth of ₹ 450 crores, the value of Balance of Trade of the country would be ______ of ₹ ______ crores.
(A) deficit, 150
(B) surplus, 150
(C) deficit, 1,050
(D) surplus, 1,050

"The Government had launched Incredible India Campaign to promote tourism in various parts of the country."
Elaborate the impact of this campaign on foreign exchange reserves and Balance of Payment of India.

Read the following text carefully :
Balance of Payments (BoP) systematically summarise, the economic transactions of an economy with the rest of the world, over a given period of time.
The BoP can be broadly divided into two accounts namely :
• current account
• capital account
... Merchandise account consists of transactions related to export and import of goods... The capital account reflects the net changes in financial claims on rest of the world...
Source : https://mospi.gov.in/109-balance – payments (adopted and modified)
On the basis of the given text and common understanding, answer the following questions :
(a) Define Balance of Payments.
(b) Differentiate between the two accounts of Balance of Payments.
(c) Give the meaning of Balance of Payments deficit with formula.

“As per the National Stock Exchange (NSE) data, dated 9th June, 2023, there was a net selling off worth ₹ 309 crore by Foreign Institutional Investors (FIIs) over the period of one month i.e., 9th May, 2023 – 9th June, 2023.”
The above mentioned transactions will be recorded on __________ side of ___________ account of Balance of Payments of India.
(Choose the correct alternative to fill in the blanks)
(A) Debit, Current
(B) Credit, Capital
(C) Credit, Current
(D) Debit, Capital

Surplus in Balance of Payments (BOP) refers to the excess of ___________.
(Choose the correct alternative to fill in the blank)
(A) Autonomous payments over Autonomous receipts
(B) Current Account payments over Autonomous receipts
(C) Capital Account receipts over Capital Account payments
(D) Autonomous receipts over Autonomous payments

Suppose, the Balance of Trade of an imaginary economy shows a favourable balance of ₹ 500 crore. The values of merchandise exports are ₹ 1200 crore and transfer payments are ₹ 400 crore.
The value of merchandise imports would be ₹ __________ crore.
(Choose the correct alternative to fill in the blank)
(A) 1700
(B) 750
(C) 700
(D) 900

Distinguish between fixed exchange rate system and flexible exchange rate system.

Identify which of the following is not one of the merits of fixed exchange rate system.
(A) Ensures stability in exchange rate
(B) Possibility of under or over valuation of foreign currency
(C) Prevents speculations in foreign exchange market
(D) Coordination of macroeconomic policies becomes convenient