Fundamentals of Foreign Trade and Documentation MCQ Questions and Answers Part – 2

Fundamentals of Foreign Trade and Documentation MCQ Questions and Answers Part – 1

Fundamentals of Foreign Trade and Documentation MCQ Questions and Answers Part – 2

Fundamentals of Foreign Trade and Documentation MCQ Questions and Answers Part – 3

51. Potential growth measures______.
A. the growth of the fastest economy in the world.
B. the fastest growth an economy has ever achieved.
C. the present rate of growth of an economy.
D. the rate of growth that could be achieved if resources were fully employedANSWER: D
52. Economic growth can be seen by an outward shift of__________.
A. the production possibility frontier.
B. the gross domestic barrier.
C. the marginal consumption frontier.
D. the Minimum Efficient Scale .
ANSWER: A
53. Free trade is based on the principle of____________.
A. comparative advantage.
B. comparative scale.
C. economies of advantage.
D. production possibility advantage.
ANSWER: A
54. Tariffs___________.
A. decrease the domestic price of a product
B. increase government earnings from tax.
C. increase the quantity of imports.
D. decrease domestic production.
ANSWER: B
55. Which of the following is not a payment method used for international trade?
A. consignment.
B. open account.
C. factoring.
D. draft.
ANSWER: C
56. Tariffs levied as a percentage of the value of the product is a________.
A. specific duty.
B. ad valorem duty.
C. anti dumping duty.
D. countervailing duty.
ANSWER: B
57. The duty levied to counteract foreign suppliers is__________.
A. specific duty.
B. ad valorem duty.
C. anti dumping duty.
D. countervailing duty.
ANSWER: C
58. The duty levied to nullify the effect of export subsidies is__________.
A. specific duty.
B. advalorem duty.
C. antidumping duty.
D. countervailing duty.
ANSWER: D
59. The export proceeds shall be realized in__________.
A. Any foreign currency.
B. Non- convertible currency.C. Convertible currency.
D. Home currency only.
ANSWER: C
60. Monetary policy relates to controlling__________.
A. money supply.
B. money supply and interest rate.
C. money supply, interest rate and exchange rate.
D. credit creation by banks.
ANSWER: C
61. The foreign Trade (Regulation) Rules was passed in the year_________.
A. 1991.
B. 1992.
C. 1993.
D. 1994.
ANSWER: B
62. Exports and Imports come under the purview of __________.
A. Ministry of Finance
B. Ministry of Commerce
C. Ministry of External Affairs
D. Ministry of Home Affairs
ANSWER: A
63. Which one of the following is not a cause but a consequence of Globalisation?
A. Integration of Markets
B. Technology and know-how
C. Greater institutionalization abroad
D. Greater Risk Exposure
ANSWER: B
64. A tariff is __________.
A. a complete ban on trade with a nation.
B. a ban on the importation of certain products from a nation.
C. an import duty.
D. a tax on goods being imported into a country.
ANSWER: D
65. When a foreign company exports and sells below the market price, it is known as__________.
A. subsidies.
B. Countervailing measures.
C. Dumping.
D. Punitive barriers.
ANSWER: C
66. _____________ emphasies conflicting interests in economic exchanges
A. Mercantalism
B. Neorealism
C. Liberalism
D. Keynesian economics
ANSWER: A
67. Voluntary export restraint is___________.A. Tariff Barrier
B. Non Tariff Barrier
C. Both Tariff and Non tariff Barrier
D. Not a Trade Barrier
ANSWER: B
68. The objectives of import duty is/are____________.
A. to raise income for the government
B. to restrict imports.
C. to encourage exports.
D. to raise income and restrict imports
ANSWER: D
69. Import tariff benefits__________
A. the consumers.
B. domestic producers
C. overseas suppliers.
D. the overseas producers
ANSWER: B
70. Non- tariff trade barriers do not include_____________.
A. administrative regulations.
B. export subsidiaries
C. fiscal barriers.
D. quota.
ANSWER: B
71. Which of the following are positive reasons for internationalization?
A. Market diversification
B. Economies of scale.
C. International competitiveness
D. All of the above.
ANSWER: D
72. Which economic factors should be analysed by organizations wishing to expand in international markets?
A. Interest rates.
B. Employment.
C. Purchasing power
D. All the above
ANSWER: D
73. Tariffs include.__________.
A. decrease the domestic price of a product
B. increase government earnings from tax.
C. increase the quantity of imports.
D. decrease domestic production.
ANSWER: B
74. The terms of trade measure.____________.
A. the income of one country compared to another.
B. the GDP of one country compared to another.
C. the quantity of exports of one country compared to another.
D. export prices compared to import prices.
ANSWER: D75. In a floating exchange rate system_________.
A. the government intervenes to influence the exchange rate.
B. the exchange rate should adjust to equate the supply and demand of the currency.
C. the balance of payments should always be in surplus.
D. the Balance of payments will always equal the government budget.
ANSWER: D
76. Duty Drawback is available for___________.
A. Import duty on imported components.
B. Central excise on indigenous components.
C. Import duty and central excise on indigenous components.
D. Import duty, central excise and VAT.
ANSWER: C
77. Investment depends mainly on.__________.
A. past levels of income .
B. future expected profits.
C. present national income levels .
D. historic data .
ANSWER: B
78. Excise duty exemption on exports is available for duty paid on___________.
A. finished products only.
B. components only.
C. finished products and components.
D. imported items.
ANSWER: C
79. Advance authorization is not available for_______________.
A. physical exports
B. service exports.
C. intermediate supplies.
D. deemed exports.
ANSWER: B
80. Under FEMA, the Reserve Bank of India has been authorized to make____________to carry out the
provision of the Act.
A. rules.
B. regulations.
C. both rules and regulations.
D. notifications.
ANSWER: B
81. Foreign exchange transactions involve monetary transactions__________.
A. among residents of the same country.
B. between residents of two countries only.
C. between residents of Two or more countries.
D. among residents of two or more countries
ANSWER: C
82. A foreign Currency account maintained by a bank abroad is its ______________
A. nostro account.
B. vostro account.C. loro account.
D. foreign bank account.
ANSWER: A
83. ‘Non-resident Bank Account’s refer to _____________.
A. nostro accounts.
B. vostro accounts.
C. accounts opened in offshore centres.
D. none of the above.
ANSWER: B
84. Non-resident bank accounts are maintained in ___________.
A. the permitted currencies.
B. the currency of the country of the bank maintaining the account.
C. the currencies in which FCNR accounts are permitted to be maintained
D. Indian rupees.
ANSWER: D
85. The statutory basis for administration of foreign exchange in India is ____________.
A. Foreign Exchange Regulation Act, 1973.
B. Conservation of Foreign Exchange and Prevention of Smuggling Act.
C. Foreign Exchange Management Act, 1999.
D. Exchange Control Manual.
ANSWER: C
86. Full fledged money changers are authorized to undertake __________.
A. only sale transactions
B. only purchase transactions
C. all types of foreign exchange transactions
D. purchases and sale of foreign currency notes, coins and travelers cheques.
ANSWER: D
87. The acronym FEMA stands for __________.
A. Foreign Exchange Management Association
B. Foreign Exchange Management Account
C. Foreign Exchange Management Act
D. None of the above
ANSWER: C
88. In India the rates of charges for foreign exchange business to be recovered by banks from their customers
are determined by __________.
A. Reserve Bank of India.
B. FEDAI.
C. FEDAI in consultation with IBA.
D. the bank concerned.
ANSWER: D
89. According to classification by IMF, the currency system of India falls under _____________.
A. managed floating.
B. independently floating.
C. crawling peg.
D. pegged to basket of currencies.
ANSWER: A90. Under the original Scheme of IMF, each country was to maintain the value of its currency__________.
A. within a margin of 1% of the par value.
B. within a margin of 2.5% of the par value.
C. not more than 1% below the par value
D. exactly at the par value.
ANSWER: A
91. Euro is not a legal tender in which of the following country_________.
A. Spain
B. Greece
C. Finland
D. none of the above.
ANSWER: D
92. A ‘credit’ in balance of payments indicates__________.
A. accumulation of bank balances abroad.
B. foreign direct investment received into the country.
C. earning of foreign exchange by the country.
D. earning of foreign exchange or incurring of liability abroad or decrease in asset abroad.
ANSWER: D
93. A ‘debit’ in balance of payments does not indicate __________.
A. import of goods and services
B. foreign tourists encashing travellers cheque in the country.
C. investments made abroad.
D. none of the above.
ANSWER: B
94. The current account of balance of payment includes____________.
A. Unilateral payments.
B. Portfolio investments.
C. short-term borrowings
D. long term borrowings
ANSWER: C
95. The current account of balance of payments does not include._______.
A. Trade in goods.
B. Trade in services.
C. Income on investments.
D. none of the above.
ANSWER: D
96. A country has a negative balance of trade. It means the balance of payments on current account
_________.
A. should also be negative.
B. should be positive.
C. may be positive or negative
D. should be same as balance of trade.
ANSWER: C
97. The capital account of balance of payments represents __________.
A. balances the central bank of the country maintains with IMF.
B. balances held by commercial banks of the country with their central bank.
C. investment made by the country’s residents abroad, but not vice versa.D. none of the above.
ANSWER: D
98. The balance of payment does not include__________.
A. transactions in real assets.
B. transactions in retail assets.
C. transactions between two non-residents
D. transactions in gold.
ANSWER: C
99. Country A imports gold worth USD 100 million for commercial purposes. The transaction will
affect._________.
A. current account only.
B. capital account only.
C. official reserves account only.
D. both current account and capital account.
ANSWER: D
100. Money received for purchase of shares in Indian company by a foreign investor will be treated as foreign
direct investment if __________.
A. the investment is in equity shares.
B. the shares are allotted directly to him the company.
C. the investor has an intention to take active role in the management of the company.
D. the shares are acquired other than through stock exchange.
ANSWER: C

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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