Balance of Payments Questions and Answers

Multiple Choice Questions and Answers  (MCQs) on Balance of Payments For Civil Services

Question 1 : Which of the following does not form part of current account under balance of payments?

a) Export and import of goods

b) Export and import of services

c) Income receipts and payments

d) Capital receipts and payments

Answer : d

Question 2 : Which of the following pairs is not correctly matched with regard to balance of payment accounts?

a) Import of goods and services – Debit in the current account

b) Receipts of transfer payments – Credit in the current account

c) Direct investment receipt – Credit in the capital account

d) Portfolio investment payments – Debit in the current account

Answer : d

Question 3 : A country is said to be in debt trap if

a) It  has to abide by the conditionality imposed by the International Monetary Fund

b) It is required to borrow money to make interest payments on outstanding loans

c) It has been refused loans or aid by creditors

d) The World Bank charges a very high rate of interest on outstanding as well as new loans

Answer : b

Question 4 : Balance in capital account refer to the

a) Nation’s net exports of goods and services

b) Nation’s net exports of financial claims

c) Nation’s net exports of international official reserve assets

d) Nation’s sum of net exports of goods, services and  financial claims

Answer : b

Question 5 : Which of the following are the components of balance of payments?

  1. Financial capital transfer
  2. External loan and investment
  3. Foreign institutional investment
  4. Issuing of external bonds
  5. Export and imports of goods and services

Select the correct answer  using the codes given below:

a) 1, 2, and 3 only

b) 2, 3, and 4 only

c) 1, 4, and 5 only

d) 1, 2, 3, 4, and 5

Answer : d

Question 6 : Consider the following components of India’s external debt in terms of their share at end March 2017:

  1. Multilateral debt
  2. Bilateral debt
  3. External commercial borrowings
  4. NRI deposits

Which of the following is the correct descending order of the above:

a) 1-2-3-4

b) 3-4-1-2

c) 3-1-2-4

d) 1-3-2-4

Answer : b

Question 7 : Consider the following statements regarding post-liberalization India’s balance of payments position:

  1. The current account deficit is on account of net import of services.
  2. The capital account surplus is on account of large amount of external assistance received on bilateral basis.
  3. The balance of payments situation has improved post-liberalization

Select the correct answer  using the codes given below:

a) 3 only

b) 2 and 3

c) 1 and 2

d) 1 and 3

Answer : a

Question 8 : Consider the following statements:

  1. India’s net exports of goods have a negative balance
  2. India’s net export of services have a positive balance
  3. India is the largest receiver of remittances around the world

Select the correct answer using the codes given below:

a) 2 only

b) 2 and 3

c) 1 and 2

d) a, 2, and 3

Answer : d

Question 9 : Which of the following steps can be taken to reduce current account deficit in India?

  1. Setting the import quota limits
  2. reducing export duty on products
  3. Setting restrictions on  repatriation of profits earned on foreign investment

Select the correct answer using the codes given below:

a) 2 only

b) 2 and 3

c) 1 and 2

d) 1, 2, and 3

Answer : d