Advertisements
Advertisements
Question
Explain the automatic mechanism by which BoP equilibrium was achieved under the gold standard.
Solution
Under the gold standard system, gold was taken as a common unit for measuring other country’s currency. Thus, the value of a currency was defined in terms of gold. The exchange rate in an open market was determined by its worth in terms of gold. It was fixed in lower limits and upper limits, under which it was allowed to fluctuate. So, the exchange rate became stable under gold standard. All the countries maintained stock of gold to exchange currency.
APPEARS IN
RELATED QUESTIONS
Should a current account deficit be a cause for alarm? Explain.
Which of the following transactions are recorded in the current account of the balance of payments?
Identify which of the following is not an example of ‘invisible item’ under Current Account of the Balance of Payments transactions:
Under the Balance of Payments structure of a nation, the two main categories of accounts for the classification of the transactions are ____________ and ____________.
i. current account
ii. unilateral transfer account
iii. capital account
iv. loan account
Identify the correct alternatives from the following:
Identify the correct matched pair from Column A to Column B and choose the correct alternative:
| Column A | Column B |
| 1. Export of weapons to Vietnam | (a) Credit side of Current Account |
| 2. Import of Apache Helicopter from USA | (b) Capital Account of Balance of Payments |
| 3. Remittances from relative from UAE | (c) Debit side of Current Account of Balance of Payments |
| 4. Investment by Tesla Incorporation in India | (d) Credit side of Current Account of Balance of Payments |
Payment for import of goods is recorded in the ______ side of the Current account of the Balance of Payments.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1: Current account records exports and imports of visible and invisible items only.
Statement 2: The balance of the current account is the difference between the sum of credit items and the sum of debit items on the current account.
Assertion (A): Import of machinery is reflected in the current account of the balance of payments.
Reason (R): Export and import of goods and Invisibles are recorded in the current account of the balance of payments.
Read the following statements carefully:
Statement 1: Export of financial services by India will be recorded on credit side of current account.
Statement 2: Foreign Direct Investments in India will be recorded on credit side of capital account.
In the light of the given statements, choose the correct alternative:
Giving valid reason, state whether the following statement is true or false:
Dividend received from investment abroad is recorded on the credit side of the capital account.
