Economics · General Awareness

International Trade Economics

2,124 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

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

In balance of payment accounts, all goods exported and imported are recorded in _____.

  1. Capital Account

  2. Visible Account

  3. Invisihic Account

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

In Balance of Payments accounting, all visible (tangible) goods traded internationally - exports and imports of physical merchandise - are recorded in the Visible Account, also called the Merchandise Account or Current Account - Trade Balance. The Capital Account records financial capital flows, while the Invisible Account records services, transfers, and other intangible transactions.

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.

Multiple choice

‘Nearshoring’ is the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country. Which of the following would not be an example of nearshoring?

  1. A private company in North America, outsourcing its IT services to a country in South Asia

  2. The British government providing defence contracts to a Scotland based defence research organization

  3. A Japan based Mobile manufacturing company outsourcing its manufacturing services to China

  4. A US law firm opening a branch in Canada
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Nearshoring involves transferring processes to nearby countries, often sharing a border. Option A describes a US company outsourcing to South Asia - these are not nearby countries (they're on opposite sides of the world). This is offshoring, not nearshoring. Options B, C, and D all involve nearby or bordering countries.

Multiple choice

In Sept 2012, the Asian Development Bank (ADB) announced that it would lend an extra $300 million to India to upgrade an additional 254 kilometres of state highways in

  1. Bihar

  2. Assam

  3. Manipur

  4. Orissa

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

ADB approved a $300 million loan in September 2012 specifically for upgrading 254 km of state highways in Bihar, focusing on improving connectivity and road quality in one of India's poorest states. This project was part of ADB's broader infrastructure development support to India, with particular focus on underserved regions needing road network improvements.

Multiple choice

According to World Trade Organization, what are the amber, blue and green boxes for(in relation to agriculture)?

  1. These are where agriculture market produce is stored.

  2. These are referred as the amount of export and import of agriculture produce by a particular country.

  3. These include Minimum support price, credit for a particular country.

  4. These are subsidies given by particular countries to their farmers.

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Boxes are for agricultural subsidy in WTO terminology, which have been given the color of traffic lights: Amber Box, Blue Box, Green Box.

Multiple choice

In case of import factoring, the functions like evaluation of buyers, collection of money on time is the job of

  1. export factor

  2. import factor

  3. domestic factor

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

The export factor selects an appropriate import factor to act on the seller's behalf overseas. With the export factor's supervision, the import factor overseas investigates the credit standing of any local customer to whom the seller wishes to sell goods. The import factor will manage the seller's collections and cover the credit risk.

Multiple choice

The Government of India put a ban on export of which of the following commodities at the price below the price of the same in domestic market ?

  1. Steel

  2. Chemical Fertiliser

  3. Pharma products

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

The Government of India banned the export of steel at prices below domestic market prices to protect domestic industries and ensure adequate domestic supply. This trade policy measure prevents exporters from selling steel cheaply in international markets while domestic consumers face higher prices. Similar export restrictions or duties have been used for other commodities.

Multiple choice

A transaction that results in change in asset or liability position outside India of a person resident in India or position in India of a person resident abroad is called

  1. current account transaction

  2. balance of payment

  3. capital account transaction

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

Capital account transaction is defined as a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India. In other words, it includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased).

Multiple choice

Which of the following is an example of an economic cartel?

  1. WTO

  2. SAFTA

  3. OPEC

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

OPEC (Organization of the Petroleum Exporting Countries) is a classic example of an economic cartel - it coordinates oil production and pricing among member countries to control market supply. WTO and SAFTA are trade organizations promoting free trade, while EU is a political-economic union. Only OPEC functions as a cartel.

Multiple choice

The emerging trading blocs in the world, such as NAFTA and ASEAN, are expected to

  1. act as constructions in free trade across the world

  2. promote free trade on the lines laid down by the WTO

  3. permit transfer of technology between member countries

  4. promote trade in agricultural commodities between the countries of north and south
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

These are local trading blocks which will enable free trade between member nations.

Multiple choice

What is the meaning of foreign trade?

  1. Export of goods only

  2. Import of goods only

  3. Import and export of goods

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Foreign trade encompasses both the import and export of goods and services between countries. It is not limited to just exports or just imports, but rather the exchange of goods across international borders. This two-way flow is essential for global commerce.

Multiple choice

Which of the following is the major item of imports?

  1. Chemical Products

  2. Iron and steel products

  3. Petroleum

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Petroleum (crude oil and products) is India's largest import item by value, accounting for a significant portion of the import bill due to India's substantial domestic demand and limited domestic production. India imports over 80% of its crude oil requirements. Chemical products and iron/steel are major imports but don't match petroleum's volume and value.

Multiple choice

What is meaning of WTO?

  1. World Taxes Organization

  2. World Trade Organization

  3. World Thermal Organization

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The World Trade Organization (WTO) is an international institution that deals with global trade rules between nations. It was established in 1995 to supervise and liberalize international trade, replacing the General Agreement on Tariffs and Trade (GATT). The WTO provides a framework for negotiating trade agreements and resolving trade disputes.