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1.	The Indian Government launched Incredible india or Atulya Bharat Campaign to promote tourism in India . How will it effect the price of foreign exchange ?
Answer» The launch of Incredible India campaign will lead ot increases in supply of the foreign exchange in India (due to increases in foreign tourists). It will result is decreases in price of the foreign exchange.

2.	How is equilibrium exchange rate determined in the foreign exchange market ?
Answer» Equilibirum exchange rate is determined at a level where demand for foreign exchange is equal to the supply of foreing exchange

3.	Supply curve of foreign exchange :A. Horizontal straight line parallel to X-axisB. Verical straight line parallel to Y-axisC. Slope downwardsD. Slope upwards
Answer» Correct Answer - D

4.	Devaluation of currency means :A. Reduction in the value of domestic currency by the market forcesB. Reduction in the value of domestic currency by the governmentC. Both (a) and (b)D. Neither (a) nor (b)
Answer» Correct Answer - B

5.	There is negative relation between foreign exchange rate and demand for foreign exchange.
Answer» Correct Answer - 1

6.	State two sources of supply of foreign currecny OR What are the ways in which foreign exchange can flow into the domestic market ?
Answer» (i) Exports of Goods and Sevices , (ii) Uniliateral taransfer from abroad.

7.	Which of the following items raises the supply of foreign exchange ?A. Import of goods from ChinaB. India students going to USA for MBAC. Donation of 50 million `$` received from MicrosoftD. Purchase of land in England
Answer» Correct Answer - C

8.	Houge international reserves are required to be maintained by the government in fixed and flexible exchange rate system
Answer» False. International reserves are required to be maintained under fixed exchange rate system only

9.	Name the two sources of demand or outflow of foreign echange. ltbr? OR Mention two reasons for the people to acquire foreign exchange.
Answer» (i) Imports of Goods and Serviec , (ii) Purchase of assets in friegn countires

10.	State whether the following items demand or supply of foreign exchange. i) Indian going to USA for education. ii) Import of goods from Japan. iii) Foreign tourists in India. iv) Bought 1500 US dollars for speculation. v) Exports to England.
Answer» Demand for foreign exchange : (i), (ii), (iv), Supply of foreign exchange, (iii), (v)

11.	Other things remaining unchanged, when in a country the price of domestic currency rises, national income is:A. likely to riseB. likely to fallC. likely to rise and fall bothD. not effected
Answer» Correct Answer - A

12.	Would he central bank need to intervene ina managed floating system ? Explain why
Answer» In a managed floating system, foreign exchange rate is determined by market forces. However, the central bank needs to intervene in this system in order to restrict the fluctuations in the exchange rate within certain limits. The aim is to keep exchange rate close to desired target values. For this, central bank maintains reserves of foreign exchange to ensure that the exchange rate stays within targeted value.

13.	Appreciation of domestic currency encouragesA. importsB. exportsC. foreign tradeD. all of these
Answer» Correct Answer - A

14.	Flexible exhange rate system is also known as:A. Managed floating systemB. Pegged exchange rate systemC. Floating exchange rate systemD. None of these
Answer» Correct Answer - C

15.	The central bank takes steps to control rise in the price of forgeign exchange in economic volues it involves as far as far the common man is concered. E
Answer» Controlling rise in price of foreign exchange makes imports cheaper. The economic , value is that common man now has to pay les for goods and servies imported