Economics ยท General Awareness

International Trade Economics

2,022 Questions

International trade economics covers the exchange of goods and services across borders, encompassing theories like comparative advantage and policies such as tariffs. Key concepts include the balance of payments, free trade agreements, and globalization measures. These topics are frequently asked in UPSC, State PSC, and other competitive exams to test economic awareness.

Balance of paymentsTrade policy and tariffsFree trade agreementsComparative advantage theory

International Trade Economics Questions

Multiple choice

Which of the following is NOT a type of trade barrier?

  1. Tariffs

  2. Quotas

  3. Embargoes

  4. Subsidies
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Subsidies are not a type of trade barrier, but rather a government policy that can promote economic activity.

Multiple choice

Which trade policy involves imposing a tax on imported goods?

  1. Tariff

  2. Quota

  3. Embargo

  4. Subsidy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A tariff is a tax imposed on imported goods, increasing their price in the domestic market. Tariffs are often used to protect domestic industries from foreign competition or to generate revenue for the government.

Multiple choice

The concept of comparative advantage suggests that countries should specialize in producing and exporting goods for which they have:

  1. Absolute Advantage

  2. Relative Advantage

  3. Opportunity Cost

  4. Comparative Cost
Reveal answer Fill a bubble to check yourself
Correct answer
Explanation

Comparative advantage refers to the ability of a country to produce a good or service at a lower opportunity cost compared to other countries. According to the theory of comparative advantage, countries should specialize in producing and exporting goods for which they have a comparative advantage.

Multiple choice

Which trade agreement aims to reduce or eliminate tariffs and other trade barriers among member countries?

  1. Free Trade Agreement

  2. Customs Union

  3. Common Market

  4. Economic Union
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A free trade agreement (FTA) is an agreement between two or more countries to reduce or eliminate tariffs and other trade barriers, facilitating the free flow of goods and services between them.

Multiple choice

Which trade policy involves restricting the quantity of a good that can be imported?

  1. Tariff

  2. Quota

  3. Embargo

  4. Subsidy
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A quota is a trade policy that restricts the quantity of a good that can be imported. Quotas are often used to protect domestic industries from foreign competition or to manage the balance of payments.

Multiple choice

Which trade policy involves prohibiting the import or export of certain goods?

  1. Tariff

  2. Quota

  3. Embargo

  4. Subsidy
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

An embargo is a trade policy that prohibits the import or export of certain goods. Embargoes are often used for political or economic reasons, such as punishing a country for its actions or protecting domestic industries.

Multiple choice

Which trade policy involves providing financial assistance to domestic industries to make them more competitive?

  1. Tariff

  2. Quota

  3. Embargo

  4. Subsidy
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A subsidy is a trade policy that involves providing financial assistance to domestic industries to make them more competitive. Subsidies can take various forms, such as direct cash payments, tax breaks, or low-interest loans.

Multiple choice

The concept of dumping refers to:

  1. Selling Goods Below Cost

  2. Exporting Goods at a Loss

  3. Price Discrimination

  4. Predatory Pricing
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dumping is a trade practice where a company exports goods to a foreign market at a price below the cost of production. Dumping can be used to gain market share or to harm competing domestic industries.

Multiple choice

What is the term for the use of language to achieve economic goals?

  1. Economic diplomacy

  2. Trade diplomacy

  3. Commercial diplomacy

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All of the above are terms for the use of language to achieve economic goals.

Multiple choice

What is the term used to describe the process by which countries reduce trade barriers and restrictions?

  1. Liberalization

  2. Deregulation

  3. Privatization

  4. Globalization
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Liberalization is the term used to describe the process by which countries reduce trade barriers and restrictions.

Multiple choice

What is the term used to describe the process by which countries adopt policies that promote free trade and investment?

  1. Economic liberalization

  2. Economic globalization

  3. Economic integration

  4. Economic convergence
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Economic liberalization is the term used to describe the process by which countries adopt policies that promote free trade and investment.

Multiple choice

According to the theory of comparative advantage, countries should specialize in producing and exporting goods and services for which they have:

  1. An absolute advantage

  2. A comparative advantage

  3. A competitive advantage

  4. A monopoly advantage
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The theory of comparative advantage states that countries should specialize in producing and exporting goods and services for which they have a comparative advantage, even if they do not have an absolute advantage in producing those goods and services.

Multiple choice

The World Trade Organization (WTO) is an international organization that:

  1. Promotes free trade among its member countries

  2. Resolves trade disputes between its member countries

  3. Sets standards for international trade

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The WTO promotes free trade among its member countries, resolves trade disputes between its member countries, and sets standards for international trade.

Multiple choice

The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement that:

  1. Eliminates tariffs on all goods traded between its member countries

  2. Reduces tariffs on goods traded between its member countries

  3. Sets rules for the conduct of international trade

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The GATT is a multilateral agreement that reduces tariffs on goods traded between its member countries.

Multiple choice

The most-favored-nation (MFN) principle is a principle of international trade law that:

  1. Requires countries to treat all other countries equally in terms of trade

  2. Requires countries to grant the same trade concessions to all other countries

  3. Prohibits countries from discriminating against other countries in terms of trade

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The MFN principle requires countries to treat all other countries equally in terms of trade, grant the same trade concessions to all other countries, and prohibits countries from discriminating against other countries in terms of trade.