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INDIAN ECONOMY > 30.Foreign Exchange Rate > Flashcards

30.Foreign Exchange Rate Flashcards

1
Q

When was the Foreign Exchange Regulation Act (FERA) passed by the Indian Parliament?

A

The Foreign Exchange Regulation Act was passed in 1973.

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2
Q

When did the Foreign Exchange Regulation Act come into force?

A

The Foreign Exchange Regulation Act came into force on January 1, 1974.

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3
Q

When was the Foreign Exchange Regulation Act repealed?

A

The Foreign Exchange Regulation Act was repealed in 1999.

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4
Q

What act replaced the Foreign Exchange Regulation Act?

A

The Foreign Exchange Regulation Act was replaced by the Foreign Exchange Management Act (FEMA).

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5
Q

What was the purpose of the Foreign Exchange Management Act?

A

The Foreign Exchange Management Act (FEMA) aimed to liberalize foreign exchange controls and restrictions on foreign investments.

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6
Q

What is the purpose of the Foreign Exchange Management Act (FEMA)?

A

The purpose of FEMA is to consolidate and amend the law related to foreign exchange in order to facilitate external trade and payments and promote the orderly development and maintenance of the foreign exchange market in India.

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7
Q

How many sections does FEMA have?

A

FEMA has 49 sections.

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8
Q

How is the violation of FERA different from the violation of FEMA?

A

Violation of FERA was a criminal offense, whereas violation of FEMA is a civil offense.

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9
Q

What does Section 46 of FEMA govern?

A

Section 46 of FEMA provides rules regarding the reasonable restrictions on Current Account transactions by the Central government.

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10
Q

What does Section 47 of FEMA regulate?

A

Section 47 of FEMA provides rules regarding the regulation of Capital Account transactions by the Reserve Bank of India.

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11
Q

Where is FEMA’s headquarters located, and how many zonal offices does it have?

A

FEMA’s headquarters are in New Delhi, and it has five zonal offices throughout India.

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12
Q

What are the two golden rules of FEMA?

A

The two golden rules of FEMA are: 1) Current Account transactions are permitted unless otherwise prohibited, and 2) Capital Account transactions are prohibited unless otherwise permitted.

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13
Q

What is the Multilateral Investment Guarantee Agency (MIGA)?

A

The Multilateral Investment Guarantee Agency is part of the World Bank Group.

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14
Q

When did the Multilateral Investment Guarantee Agency come into existence?

A

The Multilateral Investment Guarantee Agency came into existence in 1988.

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15
Q

When did India become a member of MIGA?

A

India became a member of MIGA in 1994.

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16
Q

What is the purpose of MIGA?

A

The purpose of MIGA is to protect investments against non-commercial risks and help investors obtain access to funding sources with improved financial terms and conditions.

17
Q

What are the five types of risk losses for which MIGA provides risk coverage?

A

The five types of risk losses covered by MIGA are: currency inconvertibility and transfer restrictions, government expropriation, war, terrorism and civil disturbance, breach of contract, and non-honoring of financial obligations.

18
Q

What is the foreign exchange rate?

A

The foreign exchange rate is the value of one nation’s currency in terms of the currency of another nation.

19
Q

How is the foreign exchange rate defined?

A

The foreign exchange rate is defined as the amount of domestic currency required to obtain a unit of foreign currency.

20
Q

What role does the foreign exchange rate play in an economy?

A

The foreign exchange rate plays a crucial role in an economy as it significantly impacts the trading capacity, including the import and export activities of the economy.

21
Q

What are the two ways in which the exchange rate can be fixed?

A

The exchange rate can be fixed in two ways: a fixed exchange rate system and a floating/variable exchange rate system.

22
Q

What is a fixed exchange rate?

A

A fixed exchange rate system is one in which the government or the central bank decides the exchange rate, and the value of the domestic currency is pegged to a foreign currency.

23
Q

How does the value of the domestic currency behave in a fixed exchange rate system?

A

In a fixed exchange rate system, the value of the domestic currency does not vary according to the foreign exchange market.

24
Q

What is a market exchange rate?

A

A market exchange rate is one in which the exchange rate is determined by the market forces of demand and supply of foreign currency in the domestic economy.

25
Q

How does the value of the domestic currency behave in a market exchange rate system?

A

In a market exchange rate system, the value of the domestic currency varies according to the fluctuations in the foreign exchange market.

INDIAN ECONOMY (35 decks)

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