Advertisements
Advertisements
प्रश्न
(a) In which sub-account and on which side of balance of payments account will foreign investments in India be recorded? Given reasons.
(b)What will be the effect of foreign investments in India on exchange rate? Explain.
उत्तर
(a) Foreign investment includes foreign direct investment (FDI) and foreign institutional investment (FII) or portfolio investment by the residents of a nation abroad or by the rest of the world in the domestic country. Investments made in the assets of a foreign country is FDI. Here, the assets of the foreign country are owned and controlled by the government or any resident within the domestic territory. On the other hand, FII means investment made in the assets of a foreign country. Here, the assets of the foreign country are not owned and controlled by the government or any resident within the domestic territory. These investments lead to an inward flow of foreign exchange and hence are treated as positive items in the capital account of balance of payments.
(b) Foreign investments will lead to a rise in the supply of foreign currency. Hence, the supply will tend to shift from SS to S′S′ and the new equilibrium point will be reached at Point E′. The exchange rate declines from OR to OR because the demand and supply of foreign currency increases to OQ1.
APPEARS IN
संबंधित प्रश्न
Foreign exchange transactions dependent on other foreign exchange transactions are called ______.
How does giving incentives for the exports influence foreign exchange rate? Explain
The government has started promoting foreign capital. What is its economic value in the context of Production Possibilities Frontier?
Give the meaning of ‘foreign exchange’ and ‘foreign exchange rate’. Giving reason, explain the relation between foreign exchange rate and demand for foreign exchange.
How is the exchange rate determined under a flexible exchange rate regime?
Answer the following question.
State any two factors responsible for the inflow of foreign currency.
What is the relationship between demand for foreign exchange and exchange rate?
What is the relationship between supply of foreign exchange and exchange rate?
Other things remaining unchanged, when in a country the price of foreign currency rises, national income is ______.
______ rate is the price of one currency in terms of another.
Foreign Exchange Thansactions which are independent of other transactions in the Balance of Payments Account are called:
Identify which of the following statement is true?
When domestic currency loses its value in relation to a foreign currency in the international money market, it is a situation of:
Suppose the exchange rate was \[\ce{$}\]1 = ₹ 80 and later changed to \[\ce{$}\]1 = ₹ 92. What will be its effect on the following?
Export of cotton garments by India to the USA
Suppose the exchange rate was \[\ce{$}\]1 = ₹ 80 and later changed to \[\ce{$}\]1 = ₹ 92. What will be its effect on the following?
Import of wheat by India from the USA
Suppose the exchange rate was \[\ce{$}\]1 = ₹ 80 and later changed to \[\ce{$}\]1 = ₹ 92. What will be its effect on the following?
Import of gold jewellery by the USA from India
Briefly discuss the fixed exchange rate system of determining foreign exchange rate.
State whether the following items will be included in the estimation of National Income or not: Give a reason for your answer.
Profit earned by State Bank of India in a foreign country.
If the value of US Dollar increases continuously in terms of Yen, it will result in ______.
