Class 12 Economics MCQ Chapter 7 Foreign Exchange Rate

Class 12 Economics MCQ Chapter 7 Foreign Exchange Rate Question Answer English Medium to each chapter is provided in the list so that you can easily browse through different chapters Class 12 Economics MCQ Chapter 7 Foreign Exchange Rate and select need one. AHSEC Class 12 Economics Objective Type Solutions As Per AHSEC New Book Syllabus Download PDF. AHSEC Economics MCQ Class 12.

Class 12 Economics MCQ Chapter 7 Foreign Exchange Rate

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Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. AHSEC Class 12 Economics Multiple Choice Solutions are part of All Subject Solutions. Here we have given AHSEC Class 12 Economics MCQ in English for All Chapters, You can practice these here.

Foreign Exchange Rate

Chapter: 7

1. What is an open economy?

(i) One that is self-sufficient in all goods.

(ii) One that trades goods, services, and financial assets with other countries.

(iii) One that trades only goods.

(iv) One that trades only services.

Ans: (ii) One that trades goods, services, and financial assets with other countries.

2. Imports in the circular flow act as a:

(i) Injection.

(ii) Neutral item.

(iii) Leakage.

(iv) Transfer.

Ans: (iii) Leakage.

3. Exports in the circular flow act as a:

(i) Leakage.

(ii) Injection.

(iii) Devaluation.

(iv) Speculation.

Ans: (ii) Injection.

4. Foreign exchange refers to:

(i) Only the US dollar.

(ii) Gold and silver.

(iii) All currencies other than the domestic currency.

(iv) Only electronic money.

Ans: (iii) All currencies other than the domestic currency.

5. The foreign exchange rate is:

(i) The interest rate on foreign loans.

(ii) The price of one currency in terms of another.

(iii) The price of gold in domestic currency.

(iv) The wage rate for foreign workers.

Ans: (ii) The price of one currency in terms of another.

6. The nominal exchange rate is:

(i) Inflation-adjusted rate.

(ii) Trade-weighted real index.

(iii) The money price between two currencies.

(iv) Par rate of exchange only.

Ans: (iii) The money price between two currencies.

7. The real exchange rate primarily compares:

(i) Interest rates across countries.

(ii) Foreign prices to domestic prices in a common currency.

(iii) Wage levels across sectors.

(iv) Tariff rates across countries.

Ans: (ii) Foreign prices to domestic prices in a common currency.

8. If e = ₹80/$, P = $5, and P = ₹200, the real exchange rate (RER) equals:*

(i) 0.5.

(ii) 1.

(iii) 2.

(iv) 4.

Ans: (iii) 2.

9. NEER stands for:

(i) Net External Exchange Ratio.

(ii) Nominal Effective Exchange Rate.

(iii) Non-Equilibrium Exchange Rate.

(iv) National External Exchange Rate.

Ans: (ii) Nominal Effective Exchange Rate.

10. REER differs from NEER because REER:

(i) Ignores price changes.

(ii) Adjusts for relative price levels across countries.

(iii) Uses only one trading partner.

(iv) Is not trade-weighted.

Ans: (ii) Adjusts for relative price levels across countries.

11. Depreciation of a currency means:

(i) Market-driven fall in domestic currency value under flexible rates.

(ii) Official reduction under fixed rates.

(iii) Rise in domestic currency value.

(iv) Increase in gold reserves.

Ans: (i) Market-driven fall in domestic currency value under flexible rates.

12. Devaluation means:

(i) Market-driven fall under flexible rates.

(ii) Official reduction in currency value under fixed rates.

(iii) Official increase in currency value.

(iv) Real appreciation.

Ans: (ii) Official reduction in currency value under fixed rates.

13. Appreciation of domestic currency generally:

(i) Makes foreign goods costlier at home.

(ii) Makes foreign goods cheaper at home.

(iii) Raises export competitiveness.

(iv) Increases import tariffs.

Ans: (ii) Makes foreign goods cheaper at home.

14. Revaluation refers to:

(i) Official increase in the currency’s value under fixed rates.

(ii) Market-driven rise under flexible rates.

(iii) Reduction in foreign reserves.

(iv) A fall in REER.

Ans: (i) Official increase in the currency’s value under fixed rates.

15. Major participants in the foreign exchange market include:

(i) Only tourists.

(ii) Commercial banks, brokers/authorized dealers, and monetary authorities.

(iii) Only central banks.

(iv) Only exporters.

Ans: (ii) Commercial banks, brokers/authorized dealers, and monetary authorities.

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