MCQs Economics - Day 58

MCQ’s - EconomicsDay 58

- By Ankit Agrawal

ankitmay28

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1. Which of the following best describes Bretton woods twins?

A. Twin brothers credited for their contribution towards globalmacroeconomic stability

B. Twin regulator for monetary and insurance market of a countryC. IMF and World bank togetherD. None of the above

• The International Monetary Fund (IMF) was set up along with the World Bank afterthe Second World War to assist in the reconstruction of war-ravaged countries.Leaders felt that financial stability was best achieved when countries worked in anenvironment of interdependence.

• The Bretton Woods Conference, formally known as the United Nations Monetary andFinancial Conference, held in Bretton Woods, New Hampshire, United States fromJuly 1 to 22, 1944, in which 730 delegates from all 44 Allied nations participated

• The two organisations were agreed to be set up at a conference in Bretton Woods inthe US. Hence, they are known as the Bretton Woods twins.

• Read more: https://economictimes.indiatimes.com/industry/banking/finance/what-are-the-bretton-woods-twins/articleshow/2023411.cms?from=mdr

• We will now discuss IMF and World Bank in more detail in subsequent questions

2. Consider the following about The International Monetary Fund (IMF):

A. The IMF, also known as the Fund, was conceived at a UN conference inBretton Woods, New Hampshire, United States

B. One of its main function is that it provides financial assistance tomember countries with balance of payments problems

Which of the above is correct?1. A only2. B only3. Both A and B4. Neither A nor B

• We will cover lots of static content in different questions to provide a holisticunderstanding of the topic discussed

• Read more about IMF: https://www.imf.org/en/About

3. When a country joins the IMF, it is assigned an initial quota in the samerange as the quotas of existing members. The IMF uses a quota formula tohelp assess a member’s relative positionConsider the following items:

1. Openness2. International reserves3. Economic variability4. Weighted average of GDP

Arrange the above in descending order of weightage given in deciding quota?1. 12342. 41323. 42134. 4321

• Each member country of the IMF is assigned a quota, based broadlyon its relative position in the world economy. A member country’squota determines its maximum financial commitment to the IMF, itsvoting power, and has a bearing on its access to IMF financing.

• When a country joins the IMF, it is assigned an initial quota in thesame range as the quotas of existing members of broadly comparableeconomic size and characteristics. The IMF uses a quota formula tohelp assess a member’s relative position.

• The current quota formula is a weighted average of GDP (weight of50 percent), openness (30 percent), economic variability (15percent), and international reserves (5 percent). For this purpose,GDP is measured through a blend of GDP—based on market exchangerates (weight of 60 percent) and on PPP exchange rates (40 percent).

4. Consider the following about Special Drawing Rights (SDRs) of IMF:

A. It is the IMF’s unit of account and not a currencyB. SDR basket of currencies includes the U.S. dollar, Euro, Japanese yen,

pound sterling, Chinese renminbi and Indian National Rupee


• Special Drawing Rights (SDRs) is the IMF’s unit of account and not acurrency.

• The currency value of the SDR is determined by summing the values in U.S.dollars, based on market exchange rates, of a SDR basket of currencies

• SDR basket of currencies includes the U.S. dollar, Euro, Japanese yen,pound sterling and the Chinese renminbi (included in 2016). INR is not apart of it

• The SDR currency value is calculated daily (except on IMF holidays orwhenever the IMF is closed for business) and the valuation basket isreviewed and adjusted every five years.

• Read more about it:https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14/51/Special-Drawing-Right-SDR

DENOMINATION OF QUOTAS?

Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.

Example-The largest member of the IMF is the United States, with a

current quota (as of March 2017) of SDR82.99 billion (about US$118 billion).

The smallest member is Tuvalu, with a quota of SDR2.5 million (about US$3.5 million).

SPECIAL DRAWING RIGHTS (SDRS)

It is the IMF’s unit of account and not a currency.

SDR basket of currencies includes-

U.S. dollar, Euro, Japanese yen, pound sterling and the Chinese renminbi (included in 2016).

5. The Executive Board (the Board) is responsible for conducting the day-to-day business of the IMF.

Consider the following statements related to it:

A. It is composed of 36 Directors, who are elected by member countries or by groups of countries

B. The Executive director for India is also representative for Bangladesh, Bhutan, Nepal and Sri Lanka


• The Executive Board (the Board) is responsible for conducting the day-to-day business of the IMF. It is composed of 24 Directors, who are elected by member countries or by groups of countries, and the Managing Director, who serves as its Chairman. The Board usually meets several times each week. It carries out its work largely on the basis of papers prepared by IMF management and staff.

• “The Appointments Committee of the Cabinet has approved the appointments of Dr Surjit S Bhalla, economist, executive director (India), IMF, for a period of three years from the date of the assumption of charge of the post or until further orders — whichever is earlier,” an official order said.https://www.business-standard.com/article/economy-policy/economist-surjit-bhalla-appointed-executive-director-for-india-at-imf-119100200023_1.html

• (Nepal is not included in India’s group)• Read more: https://www.imf.org/external/np/sec/memdir/eds.aspx

6. Consider the following about The Board of Governors of IMF:

1. It is the highest decision-making body of the IMF, consists of one governor and one alternate governor for each member country

2. For India, the governor and alternate governor at the IMF is the Finance minister and RBI Governor respectively

Select the correct answer using the code given below:1. 1 only2. 2 only3. Both 1 and 24. Neither 1 nor 2

• The Board of Governors, the highest decision-making body of the IMF, consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the governor of the central bank.

• All powers of the IMF are vested in the Board of Governors. The Board of Governors may delegate to the Executive Board all except certain reserved powers. The Board of Governors normally meets once a year.

7. Consider the following countries:

A. ChinaB. IndiaC. USAD. JapanE. Russia

Rank the above countries in the decreasing order of their Quota share at the IMF:1. CDABE2. DCABE3. CDAEB4. CADEB

• News from 2016: Following the implementation of the 14th General Review of Quotas, focus willnow turn to the 15th review and securing a necessary broad consensus, including on a new quotaformula, the IMF said.

• Four emerging market countries (Brazil, China, India, and Russia) will now be among the tenlargest members of the IMF.

• China’s voting share at the IMF now increases from 3.8 per cent to 6 per cent.• The US’s share decreases only marginally from 16.7 per cent to 16.5 per cent.

8. Consider the following about International Monetary and Financial Committee (IMFC) of the IMF:

A. It advises and reports to the IMF Board of Governors on the supervision and management of the international monetary and financial system, including on responses to unfolding events that may disrupt the system

B. The size and the composition of the IMFC mirrors that of the Executive Board. The IMFC has 24 members who are central bank governors, ministers, or others of comparable rank and who are usually drawn from the governors of the Fund’s 189 member countries.


• Static portion of IMF which needs to be read briefly

• Although the IMFC has no formal decision-making powers, in practice, it hasbecome a key instrument for providing strategic direction to the work andpolicies of the Fund.

• The IMFC usually meets twice a year, at the Bank-Fund Annual and SpringMeetings

9. Which of the following is not among the objectives of the IMF?

A. To promote international monetary cooperationB. To ensure balanced international tradeC. To ensure exchange rate stabilityD. To provide loan to private sectors

• IMF deals with member countries and does not provide finance to individual countries

10. Consider the following publications:

A) Fiscal Monitor reportsB) Global Financial Stability reportC) World Economic Outlook report

Which of the above are IMF publications1. A and B2. B and C3. A and C4. All of the above

• UPSC has been asking questions every year about key reports. Prepare a table for each body that will help in easy revision

• Not just names, but key findings of reports can also be used to frame questions

• See IMF publications: https://www.imf.org/en/Publications/SPROLLs/IMF-Publications-on-Globalization

MCQ’s - EconomicsDay 58

- By Ankit Agrawal

MCQs Economics - Day 58

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