Question 1

International trade increases the welfare of ________________

Accepted Answer

International trade increases the welfare of all participating countries by allowing them to specialize in the production of goods and services in which they have a comparative advantage, leading to increased efficiency and potentially lower prices for consumers.

Question 2

Ricardian theory assumes that labour is ________________ within the country.

Accepted Answer

The Ricardian theory of comparative advantage assumes that labor is homogeneous within a country, meaning that labor is of the same skill level and efficiency across different sectors.

Question 3

Income terms of trade indicate increased capacity to ________________.

Accepted Answer

Income terms of trade measure a country's export income relative to the prices of its imports, indicating its capacity to import goods and services.

Question 4

An offer curve differs from ________________.

Accepted Answer

The answer of An offer curve differs from ________________.
...

Question 5

Utility terms of trade was introduced by ________________.

Accepted Answer

Jacob Viner introduced the concept of utility terms of trade.

Question 6

When supply of exports is elastic, a country will have ________________ terms of trade.

Accepted Answer

When the supply of exports is elastic, it means the country can increase the quantity of exports in response to price changes efficiently. This ability often leads to more favorable terms of trade because the country can adapt its export supply to gain more from trade exchanges.

Question 7

Hecksher-Ohlin theory states that the relative factor prices in two countries are determined by ________________.

Accepted Answer

Heckscher-Ohlin theory posits that the pattern of international trade is determined by differences in factor endowments across countries, rather than differences in productivity.

Question 8

________________ is not an objective of commercial trade policy.

Accepted Answer

Determining the rate of interest is primarily a monetary policy function, not an objective of commercial trade policy. Trade policies focus on regulating trade between countries to protect domestic industries, preserve foreign exchange reserves, and maintain a favorable balance of payments.

Question 9

Tariff rate quotas are ________________

Accepted Answer

Tariff rate quotas involve a low tariff rate on imports up to a certain quantity (the quota) and a higher tariff rate on imports exceeding that quantity.

Question 10

Which of the following is not a NTB?

Accepted Answer

Tariff rate quotas are a type of trade policy that combines elements of both tariffs and quotas, involving a tariff rate that changes depending on the volume of goods imported, rather than a non-tariff barrier (NTB). NTBs are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs.

Question 11

A free trade area is a trade bloc where ________________

Accepted Answer

In a free trade area, countries agree to reduce or eliminate tariff barriers on all goods imported from other member nations, allowing for the free flow of goods among the member countries while each maintains its own policies towards non-member countries.

Question 12

The ________________ was signed to create the EU in 1993.

Accepted Answer

The Treaty of Maastricht, officially known as the Treaty on European Union, was signed in 1992 and came into effect in 1993. It established the European Union (EU) and introduced new forms of cooperation among its member states, including the creation of the euro and the Common Foreign and Security Policy.

Question 13

ASEAN was formed in ________________

Accepted Answer

ASEAN, the Association of Southeast Asian Nations, was formed on 8 August 1967.

Question 14

________________ refers to the alliance of multiple countries pursuing common goals.

Accepted Answer

Multilateralism refers to the practice of multiple countries working together on a given issue or towards a common goal, often through formal alliances or international organizations.

Question 15

WTO was set up on ________________

Accepted Answer

The World Trade Organization (WTO) was established on 1st January 1995, succeeding the General Agreement on Tariffs and Trade (GATT) that was created in 1948.

Question 16

In the past several years, India's net invisibles were in ________________

Accepted Answer

India's net invisibles have typically been in surplus, primarily due to earnings from services exports, remittances from Indians working abroad, and income from investments.

Question 17

Private transfers on India's current account include ________________.

Accepted Answer

Private transfers on India's current account typically include remittances, gifts, and grants, which are represented by local withdrawals from NRI (Non-Resident Indian) rupee deposits.

Question 18

The highest authority of WTO is ________________.

Accepted Answer

The Ministerial Conference is the highest decision-making body of the World Trade Organization (WTO), where decisions are made on all matters under any of the multilateral trade agreements.

Question 19

________________ is not a direct measures to correct BoP disequilibrium.

Accepted Answer

The answer of ________________ is not a direct measures to...

Question 20

Portfolio foreign investment is included in ________________ account of BoP.

Accepted Answer

Portfolio foreign investment is included in the capital account of the Balance of Payments (BoP), as it involves cross-border investments in financial assets that do not grant the investor control over the business entities. These are considered capital transactions.

Quiz 1: International Trade and Economic Theory