Samacheer Kalvi 11th Commerce Guide Chapter 28 Balance of Trade and Balance of Payments

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Commerce Guide Pdf Chapter 28 Balance of Trade and Balance of Payments Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Commerce Solutions Chapter 28 Balance of Trade and Balance of Payments

11th Commerce Guide Balance of Trade and Balance of Payments Text Book Back Questions and Answers

I. Choose the Correct Answer

Question 1.
The Statement which discloses a record of transactions between the residents of one country and residents of foreign country.
(a) Balance of Payment
(b) Balance of Trade
(c) Statement of Receipts and Payments
(d) Accounting Statement
Answer:
(a) Balance of Payment

Question 2.
The Balance of Payments councils consists of
(a) Current Account
(b) Capital Account
(c) Receipts and Payments Account
(d) Both Current Account and Capital Account
Answer:
(d) Both Current Account and Capital Account

Question 3.
Foreign capital long- term loan and foreign currency reserve are recorded under
(a) Official Capital
(b) Private Capital
(c) Banking Capital
(d) Both Private and Official Capital
Answer:
(b) Private Capital

Question 4.
The term official capital includes
(a) RBI holdings of foreign currencies
(b) Special Drawing Rights held by the Government
(c) Both A and B
(d) Foreign Investment
Answer:
(c) Both A and B

Question 5.
Balance of payments surplus indicates
(a) Exports are more than the Imports
(b) Imports are more than Exports
(c) Exports and Imports are at Equilibrium
(d) Exports and Imports are above Equilibrium
Answer:
(a) Exports are more than the Imports

II. Very Short Answer Questions

Question 1.
What do you mean by Balance of payments?
Answer:
Balance of payment refers to a systematic record of all economic transactions between the residents of one country and the residents of foreign countries during a particular period of time.

Question 2.
What do you mean by Balance of trade?
Answer:
during a year. If the export of a country exceeds its imports, it shows favourable balance of trade. If the import exceeds the exports, it shows unfavorable balance of trade.

Question 3.
Define Balance of payments
Answer:
According to International Monetary Fund, “The balance of payments for a given period is a systematic record of all economic transactions taken place during the period between residents of the reporting countries.”

Question 4.
What is the composition of private capital?
Answer:
Private capital consists of foreign investments, long-term loan,s and foreign currency deposits.

Question 5.
Mention the components of banking capital.
Answer:
Banking capital includes movement into external financial assets and liabilities commercial and cooperative banks authorized to dealing in foreign exchange.

Question 6.
Mention the components of official capital.
Answer:
It includes RBI’s holdings of foreign currency and special drawing rights (SDR) held by the Government.

III. Short Answer Questions

Question 1.
Why is the Balance of payment prepared?
Answer:
Balance of payment helps in framing monetary, fiscal, and trade policies of the country. Government keenly observes the balance of payment position of its important trade partners in making policy decisions. It reveals whether a country produces enough economic output to pay for its growth.

Question 2.
What does the Balance of payment disclose?
Answer:
The balance of payments consists of three components namely, financial account, current account and Capital account.

Question 3.
What are the credit items shown in currents accounts?
Answer:
A. Goods Export(visible)
B. Invisible-Exports

1. Transport service sold abroad
2. Banking service sold abroad
3. Insurance service sold abroad
4. Income received on loan and investment made in foreign countries
5. Expenses incurred by foreign tourists in India

Question 4.
State the components of the capital account.
Answer:
Capital account consists of three components

1. Private Capital: Private capital consists of foreign investments, long term loan and foreign currency deposits
2. Banking Capital: Banking capital includes movement into external financial asset and liabilities commercial and co operative banks authorized to dealing in foreign exchange.
3. Official Capital: It includes RBI’s holdings of foreign currency and special drawing rights (SDR) held by the Government

IV. Long Answer Questions

Question 1.
Write down the structure of the capital account
Answer:
The capital account consists of three components

1. Private Capital: Private capital consists of foreign investments, long-term loans, and foreign currency deposits.
2. Banking Capital: Banking capital includes movement into external financial assets and liabilities commercial and cooperative banks authorized to dealing in foreign exchange.
3. Official Capital: It includes RBI’s holdings of foreign currency and special drawing rights (SDR) held by the Government.

Question 2.
Distinguish balance of payment and balance of trade
Answer:

Nature	Balance of Payment	Balance of Trade
1. Meaning	It is a systematic record of all economic transactions happened between the resident of one country and resident of foreign countries during a particular period.	Balance of trade is a statement showing the net effect of export and import of a country
2. Nature of Trans­actions recorded	It records both the transactions relating to goods and services	It records only trans­actions relating to merchandise, i.e. goods transactions
3. Capital Trans­actions	It records capital trans­actions	It does not record capital transactions
4. Structure	t includes balance of trade, balance of services, balance of unilateral transfer and balance of capital trans­actions	It is part of current account of BOP
5. Net Position	It always remains bal­anced in the sense that receipt side is made equal to payment side	It may be at favorable or unfavourable or in equilibrium state
6. Indicator Eco­nomic Status	It is true indicator of economic performance of an economy	It is not true indicator of economic prosperity or economic relations of country.
7. Correcting Un­favourableness	Unfavourable balance of payment leads to deficit in balance of payment situation.	Unfavourable balance of trade can be converted into favorable balance of payment

Question 3.
Highlight the features of the balance of trade.
Answer:

1. Balance of trade is a statement showing the net effect of export and import of a country.
2. It records only transactions, relating to merchandise, i.e. goods transactions.
3. It does not record capital transactions.
4. It is part of the current account of the BOP.
5. It may be favorable or unfavourable or in an equilibrium state.
6. It is not a true indicator of economic prosperity or economic relations of a country.
7. Unfavourable balance of trade can be converted into a favorable balance of payment.

11th Commerce Guide Balance of Trade and Balance of Payments Additional Important Questions and Answers

I. Choose the Correct Answer

Question 1.
Balance of payment of a country includes:
a. Current account
b. Monetary account
c. Capital account
d. All of the above
Answer:
d. All of the above

Question 2.
The final balance of payments of a country is ………………..
a. Always balanced
b. Always deficit
c. Always surplus
d. Fluctuates
Answer:
b. Always deficit

Question 3.
Balance of payments of a country has …………… parts.
a. 2
b. 3
c. 4
d. 5
Answer:
b. 3

Question 4.
If the balance of payments of a country is in deficit, then …………………….
a. Current Account will be in deficit
b. Money supply can be increased to meet deficit
c. Country can borrow from abroad
d. (a) and (c) of the above
Answer:
d. (a) and (c) of the above

II. Very Short Answer Questions:

Question 1.
What are all the contents of the Balance of Payments?
Answer:
Balance of payments contains a classified record of all receipts and payments arising from goods exported, services rendered, and capital received by residents in a country and payment made by them in the account of goods imported.

III. Short Answer Questions

Question 1.
What are all the elements of the current account balance?
Answer:
The current account balance includes two items

1. Visible trade – Import and export of goods
2. Invisible trade – Invisible service items like banking, shipping,. insurance, travel, and transportation.

Question 2.
What are all the debit items shown in the current account?
Answer:
The following are the debit items shown in the current account:

• Goods Import
• Invisible Import
• Transport services purchased from foreign countries
• Banking services purchased from foreign countries
• Insurance services purchased from foreign countries
• Visit of our tourists to foreign countries
• Other services purchased from foreign countries
• Interest paid on loan in the home country

IV. Long Answer Questions:

Question 1.
What is the result revealed by the Balance of Payment?
Answer:
A Balance of Payment surplus indicates that country’s exports are more than its imports and its government and residents are savers. The country can even lend to other countries which in turn buy its products. As a result, it boosts economic growth in the short term. The country achieves higher economic growth due to higher exports in the long run. It builds a strong domestic market. This protects the economy from exchange rate fluctuations.

A Balance of Payment deficit points to the fact that the country’s import is more than the export. This situation forces the country to borrow from other countries to pay for its imports. It creates economic development in the short term.