Daily Quiz – 02nd Apr 2024

Explanation:

Option (a) is correct: Bretton woods system re-established a system of fixed exchange rates.

Floating exchange rate

Bretton woods system re-establishes the system of fixed exchange rates which is different from floating exchange rates.

A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies.

This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.

A fixed exchange is another currency model, and this is where a currency is pegged or held at the same value relative to another currency.

In 1971, two years after President Nixon abandoned the gold standard, the Bretton Woods system collapsed. Countries stopped pegging their currencies to the value of the dollar and began floating their currencies instead.

Statement 1 is incorrect: The remittance of the BoP Current Account is not included in the calculations of National Income.

Statement 2 is incorrect: The capital account is a record of the inflows and outflows of capital that directly affect a nation’s foreign assets and liabilities. It is mainly concerned with the transactions which are a part of international trade. It is also a part of the balance of payments.

Statement 3 is correct: The sum of all transactions recorded in the balance of payments must be zero, as long as the capital account is defi ned broadly. The reason is that every credit appearing in the current account has a corresponding debit in the capital account, and vice-versa. If a country exports an item (a current account transaction), it effectively imports foreign capital when that item is paid for (a capital account transaction).

Balance of Payments

The capital account, broadly defi ned, includes transactions in financial instruments and central bank reserves. Narrowly defined, it includes only transactions in financial instruments. The current account is included in calculations of national output, while the capital account is not.

If a country cannot fund its imports through exports of capital, it must do so by running down its reserves. This situation is often referred to as a balance of payments deficit, using the narrow definition of the capital account that excludes central bank reserves. In reality, however, the broadly defi ned balance of payments must add up to zero by definition.

As per the Impossible Trinity, a nation cannot have free capital flows, independent monetary policy, and a fixed exchange rate simultaneously.

Option (c) is correct Inventory

Inventory refers to a company’s goods and products that are ready to sell, along with the raw materials that are used to produce them. There are three primary types of inventory: fi nished goods, work-inprogress, and raw materials.

In accounting, inventory is considered a current asset, since a company typically plans to sell the fi nished products within a year. Methods to value the inventory include last-in-fi rst-out (LIFO), fi rst-in-fi rst-out (FIFO), and the weighted average method.

It is a stock variable and is treated as capital.

The 17 Sustainable Development Goals (SDGs), also known as the Global Goals, are a universal call for action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.

They are built upon the success of the Millennium Development Goals, including new areas such as climate change, economic inequality, innovation, sustainable consumption, peace and justice, among other priorities.

The goals are interconnected – often the key to success on one will involve tackling issues more commonly associated with another.

Adopted in 2015, SDGs came into effect in January 2016. They are meant to be achieved by 2030. Hence, statement 2 is correct.

The SDGs were born at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012. The Club of Rome advocated resource conservation for the first time in a more systematic way in 1968. Hence, statement 1 is not correct. Therefore, option (b) is the correct answer.

Explanation:

Statement 1 is correct: The process of globalization through liberalization and privatization policies has produced positive, as well as, negative results both for India and other countries.

Statement 2 is correct: Expansionist policies under globalization followed by nations, grows economic disparities among poor nations who has less resources to invest. Globalization

Globalization can be seen as an opportunity in terms of greater access to global markets, high technology and increased possibility of large industries of developing countries to become important players in the international arena.

On the contrary, it has compromised the welfare and identity of people belonging to poor countries. Market-driven globalization has widened the economic disparities among nations and people.

The crisis that erupted in the early 1990s in India was basically an outcome of the deep-rooted inequalities in Indian society and the economic reform policies initiated as a response to the crisis by the government, with externally advised policy package, further aggravated the inequalities.

It has increased the income and quality of consumption of only high-income groups and the growth has been concentrated only in some select areas in the services sector such as telecommunication, information technology, fi nance, entertainment, travel and hospitality services, real estate and trade, rather than vital sectors such as agriculture and industry which provide livelihoods to millions of people in the country.