[Mission 2022] QUIZ – 2022: INSIGHTS STATIC QUIZ, 22 March 2022 – Economy

Solution: c)

When the general price level rises in a country due to the rise in prices of imported commodities, inflation is termed imported. Inflation may also rise due to depreciation of the domestic currency, which pushes up the landed rupee cost of imported items.

Solution: b)

External Commercial borrowing is a part of Capital account.

Solution: a)

Current account convertibility means freedom to convert domestic currency into foreign currency and vice versa for trade in goods and invisibles (services, transfers or income from investment). Individuals and entities can convert currencies in the foreign exchange market. 

Current account convertibility is one part of currency convertibility. 

When there is current account convertibility for rupee, an exporter can sell the US Dollars (or other foreign currency) he obtained from exporting a commodity at the market determined exchange rate in India. This means that there is no exchange controls (foreign exchange controls). Similarly, when an importer buys foreign currency from India’s foreign exchange market by exchanging rupee, it is current account convertibility.

In India, there is full current account convertibility since August 20, 1993.

Solution: b)

The Agreement on Trade-Related Investment Measures (TRIMs) are rules that are applicable to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement, concluded in 1994, was negotiated under the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), and came into force in 1995. The agreement was agreed upon by all members of the World Trade Organization. Trade-Related Investment Measures is one of the four principal legal agreements of the WTO trade treaty.

Solution: b)

Balance on Current Account has two components:

• Balance of Trade or Trade Balance
• Balance on Invisibles

Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. 

Net Invisibles is the difference between the value of exports and value of imports of invisibles of a country in a given period of time. Invisibles include services, transfers and flows of income that take place between different countries. Services trade includes both factor and non-factor income. Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc.