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Intermediate Part II

International Trade Important Short Questions

Q1:      What is meant by domestic trade?

Ans:     The trade that takes place between the individuals living in the same country is called domestic or national or internal trade.

Q2:      What is meant by international trade?

Ans:     The trade that takes place between the inhabitants of two countries or the trade that take place among the individuals living in different countries of the world is called international trade.

Q3:      Write down the advantages of international trade.

Ans:     1) Acquisition of foreign goods 2) Availability of goods in case of shortage 3) Export of surplus production 4) International peace 5) Removal of monopolies

Q4:      Write down the disadvantages of international trade.

Ans:     1) Dependence on production of Limited goods 2) Dependence on other countries 3) International effects of inflation 4) Monopoly of developed countries 5) Supply of goods injurious to health

Q5:      What is the theory of comparative advantage in international trade?

Ans:     If a country has absolute advantage in the production of both goods, it should specialize and export that good in which its comparative advantage is greater and other country should export that good in which its comparative disadvantage is smaller.

Q6:      What is meant by balance of trade?

Ans:     The systematic record of the money value of visible imports and visible exports of a country in one year is called balance of trade.

Q7:      What is meant by surplus palace of trade?

Ans:     If a country visible goods exports having more value than that of visible goods imported by it the balance of trade is said to be surplus or favorable.

Q8:      What is meant by deficit or unfavorable balance of trade?

Ans:     If the value of visible exports of a country is less than the value of its visible imports, then its balance of trade will be deficit or unfavorable.

Q9:      What is meant by balance of payment?

Ans:     The systematic record of visible and invisible exports and imports of a country in one year is called balance of payment.

Q10:    What is meant by surplus or favorable balance of payment?

Ans:     If a country exports its visible and invisible goods of more value than the value of its imports of visible invisible goods, then its balance of payment will be surplus or favorable.

Q11:    What is meant by deficit or unfavorable balance of payment?

Ans:     If a country exports its visible and invisible goods of less value then the value of its imports of visible and invisible goods then, its balance of payment will be deficit or unfavorable.

Q12:    Define visible goods/ Visible items.

Ans:     Items that are visible and have volume are called visible items or visible goods, such as textiles, machinery, equipment, wheat, etc.

Q13:    Define invisible goods/ invisible items.

Ans:     Items that are invisible and do not have volume are called invisible items. For example, tourism, education, paying interest on foreigners, etc.

Q14:    What is meant by current account of balance of payment?

Ans:     In current account receipts and payments of such goods and services are included which are caried out during the current year.

Q15:    What is meant by capital account?

Ans:     In this account export and import of capital is recorded. This account consist of four items. 1) Long term net foreign investment 2) Allocation of SDRs 3) Official loans 4) Error and omissions.

Q16:    What is meant by globalization?

Ans:     Increasing integration among different countries of the world in political, social and economic dimensions is known as globalization.

Q17:    Write down advantages of globalization.

Ans:     1) Use of better Technology 2) Availability of better-quality goods 3) Rapidness in developmental works 4) Arising of atmosphere of brotherhood

Q18:    What is meant by Multinational Corporation?

Ans:     A multinational corporation is business company which produces goods in more than one county. The whole world is their market. These companies transfer capital, technology, entrepreneur abilities and marketing experience to other countries for the purposes of production of goods.

Q19:    What is meant by Transnational Corporation?

Ans:     Transnational Corporations collect information about multinational corporations on their investment in developing countries so that they can advise their government on the selection of suitable MNC for investment in their country.

Q20:    Explain WTO.

Ans:     World Trade Organization was established on 1st January 1995 after abolishing GATT. Its head quarter is in Geneva. The main purpose of this organization is to make rules and regulations for the world trade and enforce them between different countries.

Q21:    Write down advantages of W.T.O.

Ans:     1) Peaceful solution of train differences 2) Elimination of taxes on transportation 3) Guarantor of peace and safety 4) Cheap provision of necessities of life

Q22:    Write down disadvantages of W.T.O.

Ans:     1) Unfavorable economic conditions 2) Provision of commodity injurious to health 3) Decrease in reserve of foreign exchange 4) Obstacle in the way of setup of new industries.

Q23:    What is the objective of establishment of International Monetary Fund?

Ans:     The objective of establishment of IMF is to maintain the balance of payment of its member countries. This organization provides foreign exchange to improve the balance of payment of its members.

Q24:    Which are visible items of balance of payment?

Ans:     1) Expenditure on education in foreign countries

2) Expenditure on treatment in foreign countries

3) Expenditure on tourism

4) Expenditure on political, cultural and trade delegates

5) Expenditure on political issue

6) Expenditure on foreign loans

Q.25:   Define terms of trade.

Ans:     The rate at which commodities are exchange with each other in the international trade is called terms of trade.

Q.26:   Write four causes of deficit balance of payment.

Ans:     1) Decrease in exports

2) Increase in imports

3) Unfavorable terms of trade

4) Inflation

Q.27:   Write down four ways to improve the balance of payment.

Ans:     1) Increase in Exports

2) Decrease in imports

3) Devaluation in currency

4) Decrease in the quantity of money

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