Ch:7 International Trade

Question 1

define domestic trade

Answer 1

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

Question 2

What is meant by international Trade?

Answer 2

International trade is the trade that takes place between the inhabitants of two countries.

Question 3

Differentiate between national (internal) and international (external) Trade?

Answer 3

The trade that takes place between the individuals living in the same country is called national or internal trade.
Conversely, The trade that takes place among the individuals living in different countries of the world is called international or external trade.

Question 4

What is meant by balance of trade?

Answer 4

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

Question 5

What is meant by balance of payments?

Answer 5

The systematic record of visible and invisible exports and imports of a country in one year is called the balance of payments.

Question 6

Define balance of payments in the words of Prof Kindle Berger?

Answer 6

It is the systematic record of all economic transactions of a country with the rest of the world.

Question 7

Define balance of payments in the words of Prof Samuelson?

Answer 7

International balance of payments is all that transaction for which either foreign exchange is spent or received.

Question 8

What is an International monetary fund?

Answer 8

International Monetary Fund: An international organization has been
established to maintain the balance of payments of different countries which is called international monetary funds.

Question 9

What is the objective of the establishment of international monetary fund?

Answer 9

The objective of establishment of international monetary fund is to maintain the balance of payments of its member countries. This organization provides foreign exchange to improve the balance of payments of its members.

Question 10

Write six advantages of international trade?

Answer 10

Following are six advantages of international trade:

Acquisition of foreign goods.
Availability of goods in case of shortage.
Export of surplus production.
It causes international peace.
Removal of monopolies.
Optimum use of productive resources.

Question 11

Write a few disadvantages of international trade?

Answer 11

Following are a few disadvantages of international trade:

Dependence on production of limited goods.
Dependence on other countries.
International effects of inflation and deflation on the economy.
Loss to backward countries.
Monopoly of developed countries on international market.
Supply of goods injurious to health.

Question 12

Who did present classical theory of international trade?

Answer 12

Classical theory of international trade was presented by Prof Adam Smith and Ricardo.

Question 13

Who did present Absolute advantage theory of international trade?

Answer 13

Ans: Prof Adam Smith presented the absolute advantage theory of international trade.

Question 14

Who did present the comparative cost (comparative advantage) theory of
international trade?

Answer 14

Prof Ricardo presented comparative cost or comparative advantage theory of
international trade.

Question 15

Write the points of difference between domestic trade and international
trade?

Answer 15

Following are points of difference between domestic trade and international trade:

In mobility of labor and capital
Difference in currencies.
Difference in trade restrictions.
Difference in Government’s facilities.
Difference in trade agreements.
Difference in trade polices.

Question 16

Write items of balance of payments?

Answer 16

There are two types of items of balance of payments:

1-Visible imports and exports.
2-Invisible items.

Question 17

Which are invisible items of balance of payments?

Answer 17

1-Rewards of the services of foreign companies.
2-Expenditure on education in foreign countries.
3-Expenditure on Treatment in foreign countries.
4-Expenditure on Tourism.
5-Expenditure on political, cultural and trade delegates.
6-Expenditure on political issues.
7-Expenditure on foreign loans.
8-Financial aid.
9-Foreign investment and profit on it.
10- Man power earning.

Question 18

Name the classical theories of international trade?

Answer 18

1-Absolute advantage theory of Adam Smith.
2-Comparative cost theory of Ricardo.

Question 19

What is meant by surplus balance of trade?
.

Answer 19

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

Question 20

What is meant by deficit or unfavourable balance of trade?

Answer 20

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.

Question 21

What is meant by balanced balance of trade?

Answer 21

If the value of visible exports of a country is equal to the value of its visible imports, then it is called balanced balance of trade.

Question 22

What is meant by surplus or favourable balance of payments?

Answer 22

If a country exports its visible and invisible goods of more value than the value of its imports of visible and invisible goods, then its balance of payments will be surplus or favourable.

Question 23

What is meant by deficit or unfavourable balance of payments!

Answer 23

If a country exports its visible and invisible goods of less value than the value of its imports of visible and invisible goods then, its balance of payments will be deficits or unfavourable.

Question 24

How can trade position of a country be examined either by taking into
account balance of trade or balance of payments?

Answer 24

To examine the trade position of a country, instead of its balance of trade, its balance of payments is taken into account.

Question 25

Write four causes of deficit balance of payments of a country?

Answer 25

Following are four causes of deficit balance payments:

(1)Decrease in exports.
(2)Increase in imports.
(3)Unfavourable terms of trade.
(4)Inflation.

Question 26

Write four measures to improve balance of payments of a country?

Answer 26

Following are four measures to improve the balance of payments of a country:

Increase in exports.
Decrease in imports.
Devaluation in currency.
Decrease in quantity of money.