Q22 of 39 Page 1

(a) Define ‘‘Trade Surplus’’ and ‘‘Trade Deficit’’.

(b) Discuss briefly the concept of a managed floating system of foreign


exchange rate determination.


a) Trade surplus is the situation when the exports of goods and services exceed the imports of goods and services.

Trade deficit: Trade surplus is the situation when the exports of goods and services fall short of the imports of goods and services.


b)


● Managed floating exchange rate system is a combination of a fixed exchange rate system and the floating exchange rate system.


● The foreign exchange market is allowed to freely operate.


● They have to follow an official declaration of rules for intervention by the central monetary authority of the country.


● This type of exchange rate system determines the exchange rate by the forces of the market with regular intervention by the monetary authority of the country.


More from this chapter

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20

‘‘Higher Gross Domestic Product (GDP) means greater per capita availability of goods in the economy.’’ Do you agree with the given

statement? Give valid reason in support of your answer.


OR


Explain the meaning of Real Gross Domestic Product and Nominal Gross Domestic Product, using a numerical example.


 21

Distinguish between ‘Qualitative and Quantitative tools’ of credit control as may be used by a Central Bank.

 23

Discuss the adjustment mechanism in the following situations :

(a) Aggregate demand is lesser than the Aggregate Supply.


(b) Ex-Ante Investments are greater than Ex-Ante Savings.


 24

Define the following :

(a) Value Addition


(b) Gross Domestic Product


(c) Flow Variables


(d) Income from property and entrepreneurship


OR


Given the following data, find the values of ‘‘Gross Domestic Capital Formation’’ and ‘‘Operating Surplus’’.