Economics 3 Marks Question

When price of a foreign currency falls, imports from that foreign country become cheaper. So, imports increase and hence, the demand for foreign currency rises. For example, if price of 1 US dollar falls from ₹ 79 to ₹ 77, then imports from USA will increase as American goods will become relatively cheaper. It will raise the demand for US dollars.

Economic Transactions
Economic transactions refer to those transactions which involve transfer of the title or ownership of goods, services, money and assets. They are broadly categorised as under:
i. Visible Items: These include all types of physical goods which are exported and imported. These are called 'visible items' as they are made of some matter or material and can be seen, touched and measured. The movement of such items is open and can be verified by the custom officials.
ii. Invisible Items: Invisible items of trade refer to all types of services like shipping, banking, insurance etc., which are given and received. These are called invisible items as they cannot be seen, felt, touched or measured.
iii. Unilateral Transfers: Unilateral transfers include gifts, personal remittances and other 'one-way transactions'. Since these transactions do not involve any claim for repayment, they are also known as unrequited transfers.
iv. Capital Transfers: Capital transfers relate to capital receipts (through borrowings or sale of assets) and capital payments (through capital repayments or purchase of assets).

The components of operating surplus are

• Rent is a factor income earned by the owners for lending their services such as land, building etc.
• Royalty is the income earned by a person/institution for lending Intellectual Property Rights and rights of sub soil assets.
• Interest is the factor income earned by the owners for lending capital for production process.
• Profit is a factor income earned for entrepreneurship.