Forex Reserves of India and Forex Management

31. Which financial instrument is commonly used for hedging foreign exchange risk?
a. Forward contracts
b. Options contracts
c. Futures contracts
d. Swaps contracts

32. What is the purpose of a currency swap in Forex Management?
a. To exchange one currency for another at a predetermined exchange rate
b. To speculate on currency movements and earn profits
c. To borrow funds in one currency and lend in another currency
d. To hedge against exchange rate fluctuations

33. Which of the following is NOT a factor influencing the demand and supply of foreign exchange?
a. Interest rates
b. Inflation levels
c. Government fiscal policy
d. Population growth rate

34. What does the term “Balance of Payments” (BoP) refer to?
a. The total value of a country’s imports and exports
b. The difference between a country’s income and expenditure
c. The record of all economic transactions between residents of one country and residents of other countries
d. The sum of a country’s external debt and foreign exchange reserves

35. What is the current account in the Balance of Payments?
a. It records international trade in goods and services.
b. It records international capital flows.
c. It records changes in foreign exchange reserves.
d. It records external debt obligations.