Here we are providing 1 Mark Questions for Economics Class 12 Chapter 6 Open Economy Macroeconomics are the best resource for students which helps in class 12 board exams.

One Mark Questions for Class 12 Economics Chapter 6 Open Economy Macroeconomics

Question 1.
When will there be a surplus in balance of trade?
Answer:
The balance of trade is in surplus when the imports of goods are less than the exports.

Question 2.
Which two transactions determine balance of trade?
Answer:
Export and import of visible items determine the balance of trade.

Question 3.
When is there a deficit in the balance of trade?
Answer:
The balance of trade is in deficit when the imports of goods are more than the exports.

Question 4.
What does Balance of Payments account of a country record?
Answer:
The Balance of Payments (BoP) account of a country records the payments and receipts of a country with the rest of the world, during one year. ,

Question 5.
List two items of the capital account of Balance of Payment account
Answer:
Items of the capital account of Balance of Payment account are:
(i) Private foreign loan flow
(ii) Movement in banking capital

Question 6.
What is the difference between the values of exports of goods and imports of goods called?
Answer:
The difference between the values of exports of goods and imports of goods is called balance of trade.

Question 7.
What is balance of trade? (C.B.S.E 2014)
Answer:
Balance of trade refers to the relationship between the value of imports and exports of the goods of a country. It includes only visible items.

Question 8.
Define Balance of Payment. (C.B.S.E 2017)
Answer:
Balance of Payments (BoP) records the transactions in goods, services and assets of the residents of a country with the rest of the world. It also records the country’s demand for and supply of foreign exchange.

Question 9.
What do you mean by Balance of Payment on current account?
Answer:
The Balance of Payments on current account is the sum of balance of merchandise trade, services and net transfers received from rest of the world.

Question 10.
What do you mean by Balance of Payment on capital account?
Answer:
The Balance of Payments on capital account includes capital transactions relating to borrowing and lending of capital, sale and purchase of assets, interest payment, etc.

Question 11.
What is current account deficit in the Balance of Payments? (C.B.S.E. 2014)
Answer:
Current account is said to be in deficit when the export of goods and services and unilateral transfers falls’ short of the import of goods and services and unilateral transfers.

Question 12.
What is meant by “current account surplus”? (C.B.S.E Outside Delhi 2019)
Answer:
Current account surplus refers to excess of receipts from value of exports of visible items and invisible items; and unilateral transfers over payment for value of imports of visible items and invisible items; and unilateral transfer.

Question 13.
What is foreign exchange rate? (C.B.S.E 2011)
Answer:
Foreign exchange is the price of one unit of the foreign currency in terms of the domestic currency.

Question 14.
What is fixed exchange rate system? (C.B.S.E. Outside Delhi 2012) :
Answer:
Fixed exchange rate is the system in which the exchange rate is set and maintained by the government as official exchange rate. Flexible exchange rate is the system in which the exchange rate is determined by the demand and supply forces in the foreign exchange market.

Question 15.
Define foreign exchange market.
Answer:
Foreign exchange market is the market where the national currencies are traded for one another.

Question 16.
What is ‘hybrid’ system?
Answer:
Hybrid system is the combination of fixed and flexible exchange rates system.

Question 17.
How can increase in Foreign Direct Investment affect the price of foreign exchange ? (C.B.S.E 2013)
Answer:
Increase in Foreign Direct Investment increases the supply of foreign exchange and hence decreases the price of foreign exchange.

Question 18.
How can Reserve Bank of India help in bringing down the foreign exchange rate which is very high? (C.8.S.E Outside Delhi 2013)
Answer:
The Reserve Bank of India can sell foreign currency in exchange of domestic currency to bring down the foreign exchange rate.

Question 19.
What is devaluation? (C.B.S.E 2014)
Answer:
Devaluation of a currency means lowering of the value of the domestic currency by the monetary authority in terms of the currencies of the other countries.

Question 20.
What is managed floating exchange rate? (C.B.S.E. Outside Delhi 2014)
Answer:
Managed floating exchange rate is a system that allows adjustment in exchange rate according to a set of rules and regulations which are officially declared in the foreign exchange market.

Question 22.
Define floating exchange rate. (C.B.S.E Outside Delhi 2014)
Answer:
A floating exchange rate is the rate determined by the free play of market without any intervention by; the centra bank.

Question 23.
What is meant by depreciation of domestic currency? (C.B.S.E. Outside Delhi 2017)
Answer:
Currency depreciation implies that domestic currency has become less expensive in terms of foreign currency.