Insights Static Quiz -217, 2019–Economy

Solution: c)

In this case Air India is an Indian Company and a foreigner will be contributing money towards his travel. Therefore, overall there would be foreign exchange inflow and thus we can classify it as an export.

Solution: d)

Gross capital formation, in simple terms is equivalent to investment made. It was earlier called gross domestic investment. The part of GDP that is used is called gross domestic consumption, while the part that is saved is gross domestic savings (GDS). Some part of this GDS will be re-invested back, and that is called gross capital formation. Now, an increase in GDP or GDS will not necessarily lead to an increase in capital formation. Because how much in invested back will depend on many other factors.

Solution: c)

A managed floating exchange rate system is a flexible exchange rate system in which the government or the country’s central bank may occasionally intervene in order to direct the country’s currency value into a certain direction. This is generally done in order to act as a buffer against economic shocks and hence soften its effect in the economy.

Solution: a)

Predatory Pricing – the pricing of goods or services at such a low level that other firms cannot compete and are forced to leave the market.

Solution: b)

A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.