Assertion Reason: Foreign Exchange Rate

1.Assertion (A): Forward rate of exchange is a contractual rate of exchange. Reason (R): Forward rte of exchange is a contract signed today but are to be honored sometimes in the future.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

2.Assertion (A): There is positive and direct relationship between supply for foreign exchange and foreign exchange rate. Reason (R): Depreciation of domestic currency makes goods of home country more cheaper.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

3. Assertion (A): In case of currency depreciation, more rupees are to be paid to buy one US dollar. Reason (R): domestic currency loses its value in relation to US dollar.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

4.Assertion (A): Managed floating system is also known as dirty floating. Reason (R): In managed floating system the central bank of a country intervene to buy or sell foreign currencies in an attempt to stabilize exchange rate.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

5. Assertion (A): In case of devaluation, market forces of demand and supply plays a major role. Reason (R): Devaluation leads to excess supply of domestic currency in the international money market.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

6. Assertion (A): Fixed exchange rate system is also known as pegged exchange rate system. Reason (R): Fixed exchange rate system is fixed by the market forces of demand and supply.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

7.Assertion (A): Export is an important source of supply of foreign exchange from rest of the world. Reason (R): In case of currency depreciation, more rupees are to be paid to buy one US dollar.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

8.Assertion (A): When small but regular adjustments in the exchange rate for different currencies are allowed is known as crawling peg system. Reason (R): It allows maximum 1% (plus-minus) adjustment at a time.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

9.Assertion (A): Flexible exchange rate is determined by the government. Reason (R): Manage floating is an attempt to keep the exchange rate within the desired limits.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

10.Assertion (A): The number units of domestic currency required to purchase a unit of foreign currency is called nominal exchange rate. Reason (R): It is measured in terms of constant price level.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

11. Assertion (A): Decrease in demand of foreign currency leads to currency appreciation. Reason (R): Decrease in demand causes a fall in exchange rate.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

12. Assertion (A): There is direct relationship between demand of foreign currency and exchange rate. Reason (R): Sending gift to abroad will increase demand of foreign currency.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

13. Assertion (A): appreciation of foreign currency induces FDI from rest of the world. Reason (R): Appreciation of foreign currency implies depreciation of the domestic currency.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

14.Assertion (A): Make in India, the programme initiated by the government of India leads to rise in foreign exchange rate. Reason (R): Inflow of foreign exchange improve the trade deficit of a country.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)
Inflow of foreign exchange improve foreign exchange reserved of a country.

15. Assertion (A): Gold standard system of exchange rate is an old variant of fixed exchange rate system. Reason (R): Mint value of a currency implies paper value of that currency.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

16.Assertion (A): Fixed exchange rate system is more stable than flexible exchange rate system. Reason (R): Free play of demand and supply of foreign exchange may lead to instability in the system.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

17.Assertion (A): Exchange rate is the price of a currency expressed in terms of another currency. Reason (R): Flexible exchange rate is that exchange rate which is determined by the supply-demand forces in the foreign exchange market.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

18.Assertion (A): Devaluation and depreciation of currency will encourage exports of a country. Reason (R): Devaluation occur due to market forces while depreciation occurs due to government.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

19.Assertion (A): spot market is daily in nature. Reason (R): Spot exchange rate is that exchange rate at which forward transactions are to be honored.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

20. Assertion (A): Heading function helps to managed risk in the international money market. Reason (R): Bretton Woods system decided to exchange of Gold with dollars at the rate of 1 ounce of gold equal to 35 dollar.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)