Economics · 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

Directions: The following passage has some blanks, each of which has been numbered. Find out the appropriate word and fill blank (7).

If the advantages of international trade and division of labour are as strong and __(1) as economists assert, the students of international trade may well be puzzled by the _(2) to which governments impose _(3) on their __(4) trade. The actions of governments, however, are not entirely by economic __(5). When a country aims at economic self-sufficiency, the reasons are generally _(6). For example, a country may wish to __(7) its farming industry in order to be able to feed itself in time of war, or it may try to build an iron and ore industry as part of an industrial programme. If a conference is called to consider a reduction of ___(8), a country that had imposed no restrictions on imports would find itself at a _(9), since it would have no ____(10) to offer.

  1. elevate

  2. sanction

  3. promote

  4. enliven

  5. guide
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

'Promote' fits best here as to feed during war time, the farming industry has to be promoted.

Multiple choice

Directions: The following passage has some blanks, each of which has been numbered. Find out the appropriate word and fill blank (6).

If the advantages of international trade and division of labour are as strong and __(1) as economists assert, the students of international trade may well be puzzled by the _(2) to which governments impose _(3) on their __(4) trade. The actions of governments, however, are not entirely by economic __(5). When a country aims at economic self-sufficiency, the reasons are generally _(6). For example, a country may wish to __(7) its farming industry in order to be able to feed itself in time of war, or it may try to build an iron and ore industry as part of an industrial programme. If a conference is called to consider a reduction of ___(8), a country that had imposed no restrictions on imports would find itself at a _(9), since it would have no ____(10) to offer.

  1. controversial

  2. rational

  3. tactical

  4. national

  5. political
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

'Political' fits best here. The government actions will be political based.

Multiple choice

Directions: The following passage has some blanks, each of which has been numbered. Find out the appropriate word and fill blank (5).

If the advantages of international trade and division of labour are as strong and __(1) as economists assert, the students of international trade may well be puzzled by the _(2) to which governments impose _(3) on their __(4) trade. The actions of governments, however, are not entirely by economic __(5). When a country aims at economic self-sufficiency, the reasons are generally _(6). For example, a country may wish to __(7) its farming industry in order to be able to feed itself in time of war, or it may try to build an iron and ore industry as part of an industrial programme. If a conference is called to consider a reduction of ___(8), a country that had imposed no restrictions on imports would find itself at a _(9), since it would have no ____(10) to offer.

  1. contemplations

  2. deliberations

  3. resolutions

  4. considerations

  5. decisions
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Here 'considerations' fits best as it means government action is not only due to te economic reasons or considerations.

Multiple choice

Directions: The following passage has some blanks, each of which has been numbered. Find out the appropriate word and fill blank (8).

If the advantages of international trade and division of labour are as strong and __(1) as economists assert, the students of international trade may well be puzzled by the _(2) to which governments impose _(3) on their __(4) trade. The actions of governments, however, are not entirely by economic __(5). When a country aims at economic self-sufficiency, the reasons are generally _(6). For example, a country may wish to __(7) its farming industry in order to be able to feed itself in time of war, or it may try to build an iron and ore industry as part of an industrial programme. If a conference is called to consider a reduction of ___(8), a country that had imposed no restrictions on imports would find itself at a _(9), since it would have no ____(10) to offer.

  1. duties

  2. charges

  3. prices

  4. customs

  5. rates
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

'Duties' fits best here. The clue is in the next part of the sentence, 'restrictions on imports'. These restrictions are in the form of 'duties'.

Multiple choice

Directions: The following passage has some blanks, each of which has been numbered. Find out the appropriate word and fill blank (10).

If the advantages of international trade and division of labour are as strong and __(1) as economists assert, the students of international trade may well be puzzled by the _(2) to which governments impose _(3) on their __(4) trade. The actions of governments, however, are not entirely by economic __(5). When a country aims at economic self-sufficiency, the reasons are generally _(6). For example, a country may wish to __(7) its farming industry in order to be able to feed itself in time of war, or it may try to build an iron and ore industry as part of an industrial programme. If a conference is called to consider a reduction of ___(8), a country that had imposed no restrictions on imports would find itself at a _(9), since it would have no ____(10) to offer.

  1. propositions

  2. adjustments

  3. concessions

  4. proposals

  5. grants

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

'Concessions' fits best here as the country has not imposed any duties. Therefore it cannot consider any reductiona nd thereby offer a concession to other countries.

Multiple choice

Which of the following is/are NOT one of the objectives of International Monetary Fund (IMF)? (A) To ensure exchange rate stability. (B) To ensure Balanced International Trade (C) To replace World Trade Organisation in years to come

  1. Only (A)

  2. Only (B)

  3. Only (C)

  4. (A) and (B) both

  5. (A) and (C) both
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The IMF's actual objectives include promoting international monetary cooperation, ensuring exchange rate stability (A is an objective), and facilitating balanced international trade (B is broadly aligned with IMF goals). However, replacing the WTO (C) is NOT an IMF objective - the WTO and IMF are separate organizations with different mandates. The IMF deals with monetary stability while WTO handles trade rules.

Multiple choice

Directions: The question below has a starting statement (S) and an ending statement (E). Three statements (A), (B) and (C) are given in between these two. Select the option that indicates a logical paragraph.

(S) The importance of the Panama Canal and the Suez Canal can be (A) construction and maintenance and large chunk of world trade (B) directly depends on these routes which have gradually (C) gauged from the fact that billions of dollars have been spent on their (E) become politically and economically important

  1. BAC

  2. CAB

  3. ABC

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

The importance of the Panama Canal and the Suez Canal can be gauged from the fact that billions of dollars have been spent on their construction and maintenance and large chunk of world trade directly depends on these routes, which have gradually become politically and economically important.

Multiple choice

The difference between the export and import of services is called

  1. Balance of Trade

  2. Balance of Invisibles

  3. Balance of Current account

  4. Balance of Capital account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Balance of Invisibles specifically refers to trade in services (and other intangible items like transfers) as opposed to Balance of Trade which covers only visible merchandise goods. Services are called 'invisibles' because they are intangible and don't involve physical goods crossing borders.

Multiple choice

An economic union is the most advanced type of economic integration.

  1. It unifies the monetary and fiscal policies of member states

  2. It permits no tariff barriers on trade among members

  3. It allows free movement of capital and labour among member nations

  4. It allows no tariffs on trade among members and a common tariff policy towards the rest of the world is followed
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An economic union represents the deepest form of economic integration, going beyond a common market to include coordination or unification of economic policies among member states. While economic unions include features like free trade (B) and factor mobility (C), the distinguishing feature that makes it the 'most advanced' is the integration of economic policy frameworks including monetary and fiscal coordination (A).

Multiple choice

Match the following:

 
List - I
List - II
(a) WTO
(i) Provides loans to address short-term balance of payments problems.
(b) RBI
(ii) Multilateral trade negotiating body.
(c) IMF
(iii) Facilitating lending and borrowing for reconstruction and development.
(d) IBRD
(iv) Central Bank of India.

  1. (a) - (ii), (b) - (iv), (c) - (i), (d) - (iii)

  2. (a) - (iv), (b) - (iii), (c) - (ii), (d) - (i)

  3. (a) - (iii), (b) - (ii), (c) - (iv), (d) - (i)

  4. (a) - (i), (b) - (ii), (c) - (iii), (d) - (iv)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

WTO handles multilateral trade negotiations (ii). RBI is India's Central Bank (iv). IMF addresses short-term balance of payments issues (i). IBRD facilitates lending for reconstruction and development (iii). All matches in option A are correct.

Multiple choice

The gains from two nations depend on:

  1. Domestic barter rates

  2. Difference in the domestic barter rates of the two countries

  3. Terms of trade

  4. Degree of absolute advantage
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Gains from international trade depend on the terms of trade - the ratio at which goods are exchanged between countries. Domestic barter rates and absolute advantage don't directly determine trade gains; it's the relative exchange terms.

Multiple choice

India abolished the quantitative restrictions on imports of 1429 items in 2000 and 2001 as per the commitment to which of the following?

  1. South Asian Free Trade Association (SAFTA)

  2. General Agreement on Tariffs and Trade (GATT)

  3. World Trade Organisation (WTO)

  4. Non-Aligned Movement
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As a WTO member, India committed to removing quantitative restrictions (QRs) on imports. This was done in phases - removing QRs on 1429 items in 2000-2001 fulfilled India's WTO obligations under the Agreement on Quantitative Restrictions.

Multiple choice

Which type of elasticity plays a crucial role in determining international trade?

  1. Elasticity of demand

  2. Price elasticity of demand

  3. Income elasticity of demand

  4. Cross elasticity of demand
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If the demand for imports is inelastic, the increase in prices as a result of devaluation will adversely affect the balance of payments, because at higher prices of the imports and almost the same quantity of imports, the country would have to spend more on the imports than before and vice versa. Hence, price elasticity plays significant role in international trade.