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All questions of Trade & Commerce for UPSC CSE Exam
Which trade theory states that a country should specialize in producing goods it can produce most efficiently and trade for goods it cannot produce efficiently?- a)Theory of Comparative Advantage
- b)Absolute Advantage
- c)Heckscher-Ohlin Theory
- d)New Trade Theory
Correct answer is option 'A'. Can you explain this answer?
Which trade theory states that a country should specialize in producing goods it can produce most efficiently and trade for goods it cannot produce efficiently?
a)
Theory of Comparative Advantage
b)
Absolute Advantage
c)
Heckscher-Ohlin Theory
d)
New Trade Theory
|
Vikram Mehta answered |
The Theory of Comparative Advantage, proposed by David Ricardo, suggests that a country should specialize in producing goods and services in which it has a lower opportunity cost and trade those goods with other countries. By doing so, all countries can benefit from trade and overall efficiency increases.
Which of the following is an example of a non-tariff trade barrier?- a)Import quota
- b)Export subsidy
- c)Foreign exchange controls
- d)Bilateral trade agreement
Correct answer is option 'C'. Can you explain this answer?
Which of the following is an example of a non-tariff trade barrier?
a)
Import quota
b)
Export subsidy
c)
Foreign exchange controls
d)
Bilateral trade agreement
|
|
Vikram Mehta answered |
Non-tariff trade barriers are measures other than tariffs that restrict imports or exports. Foreign exchange controls, also known as currency controls, limit the availability or convertibility of a country's currency, affecting the ability of businesses to conduct international trade.
Which international organization deals with the settlement of trade disputes among member countries?- a)UNICEF
- b)WTO
- c)WHO
- d)UNHCR
Correct answer is option 'B'. Can you explain this answer?
Which international organization deals with the settlement of trade disputes among member countries?
a)
UNICEF
b)
WTO
c)
WHO
d)
UNHCR
|
|
Vikram Mehta answered |
The WTO not only promotes fair trade practices but also provides a platform for member countries to resolve trade disputes through a formal dispute settlement mechanism. The Dispute Settlement Body (DSB) of the WTO handles disputes and ensures that trade disagreements are addressed based on established rules and procedures.
What is "Dumping" in the context of international trade?- a)Selling products at higher prices in foreign markets
- b)Exporting goods above their production cost
- c)Selling goods below their production cost in foreign markets
- d)Exceeding the agreed-upon quota in trade agreements
Correct answer is option 'C'. Can you explain this answer?
What is "Dumping" in the context of international trade?
a)
Selling products at higher prices in foreign markets
b)
Exporting goods above their production cost
c)
Selling goods below their production cost in foreign markets
d)
Exceeding the agreed-upon quota in trade agreements
|
|
Vikram Mehta answered |
Dumping is a trade practice where a country exports goods to another country at prices lower than their production cost or the domestic market price. This can harm domestic industries in the importing country, distort competition, and lead to trade disputes.
Which trade theory emphasizes the role of economies of scale and product differentiation in international trade?- a)Theory of Absolute Advantage
- b)Theory of Comparative Advantage
- c)New Trade Theory
- d)Heckscher-Ohlin Theory
Correct answer is option 'C'. Can you explain this answer?
Which trade theory emphasizes the role of economies of scale and product differentiation in international trade?
a)
Theory of Absolute Advantage
b)
Theory of Comparative Advantage
c)
New Trade Theory
d)
Heckscher-Ohlin Theory
|
|
Vikram Mehta answered |
The New Trade Theory suggests that international trade can be influenced by economies of scale, which lead to lower production costs and increased specialization. Additionally, it emphasizes the importance of product differentiation in trade, where unique products can lead to a competitive advantage in international markets.
Which international organization deals with intellectual property rights and trade issues?- a)UNICEF
- b)IMF
- c)WHO
- d)WIPO
Correct answer is option 'D'. Can you explain this answer?
Which international organization deals with intellectual property rights and trade issues?
a)
UNICEF
b)
IMF
c)
WHO
d)
WIPO
|
|
Vikram Mehta answered |
WIPO is the international organization responsible for promoting the protection of intellectual property rights worldwide. It administers various treaties related to patents, trademarks, copyrights, and trade secrets, ensuring that intellectual property is respected and protected in international trade.
What is the purpose of an export subsidy?- a)To promote imports from other countries
- b)To support domestic producers in international markets
- c)To discourage domestic production and consumption
- d)To stabilize exchange rates
Correct answer is option 'B'. Can you explain this answer?
What is the purpose of an export subsidy?
a)
To promote imports from other countries
b)
To support domestic producers in international markets
c)
To discourage domestic production and consumption
d)
To stabilize exchange rates
|
|
Vikram Mehta answered |
An export subsidy is a financial incentive given by the government to domestic producers to promote exports. It helps domestic producers remain competitive in international markets by reducing their production costs or providing direct financial assistance, thereby encouraging increased exports.
What is the function of the International Monetary Fund (IMF) in the context of trade?- a)Facilitating trade negotiations between member countries
- b)Providing financial assistance to countries experiencing trade deficits
- c)Enforcing trade rules and resolving trade disputes
- d)Implementing trade sanctions on non-compliant countries
Correct answer is option 'B'. Can you explain this answer?
What is the function of the International Monetary Fund (IMF) in the context of trade?
a)
Facilitating trade negotiations between member countries
b)
Providing financial assistance to countries experiencing trade deficits
c)
Enforcing trade rules and resolving trade disputes
d)
Implementing trade sanctions on non-compliant countries
|
|
Vikram Mehta answered |
The IMF provides financial assistance to member countries facing balance of payments problems, including trade deficits. It offers temporary financial support and policy advice to help countries address economic challenges and stabilize their economies during periods of crisis.
What is the main objective of the World Trade Organization (WTO)?- a)Promote fair trade practices
- b)Establish a world currency
- c)Control international migration
- d)Reduce global poverty
Correct answer is option 'A'. Can you explain this answer?
What is the main objective of the World Trade Organization (WTO)?
a)
Promote fair trade practices
b)
Establish a world currency
c)
Control international migration
d)
Reduce global poverty
|
|
Vikram Mehta answered |
The main objective of the WTO is to promote fair and non-discriminatory trade practices among member countries. It aims to ensure that trade flows as smoothly, predictably, and freely as possible while prohibiting unfair practices such as trade barriers and subsidies that distort international trade.
Which economic theory advocates a completely "hands-off" approach to trade?- a)Mercantilism
- b)Protectionism
- c)Laissez-faire
- d)Keynesian economics
Correct answer is option 'C'. Can you explain this answer?
Which economic theory advocates a completely "hands-off" approach to trade?
a)
Mercantilism
b)
Protectionism
c)
Laissez-faire
d)
Keynesian economics
|
|
Vikram Mehta answered |
Laissez-faire is an economic theory that advocates minimal government intervention in economic affairs, including trade. It suggests that free markets should operate without restrictions, and the government should not interfere with the pricing, production, or distribution of goods and services.
Which of the following is a trade barrier?- a)Export promotion
- b)Free trade agreement
- c)Import duty
- d)Bilateral trade
Correct answer is option 'C'. Can you explain this answer?
Which of the following is a trade barrier?
a)
Export promotion
b)
Free trade agreement
c)
Import duty
d)
Bilateral trade
|
|
Vikram Mehta answered |
A trade barrier is any measure that restricts or hinders the free flow of goods and services between countries. Import duty, also known as a tariff, is a tax imposed by a government on imported goods. It increases the cost of imported products, making them less competitive compared to domestically produced goods.
The "Most Favored Nation" clause in international trade refers to:- a)Giving preferential treatment to certain countries
- b)Imposing higher tariffs on specific products
- c)Granting trade privileges to the strongest economy
- d)Extending the best trade terms to all trading partners
Correct answer is option 'D'. Can you explain this answer?
The "Most Favored Nation" clause in international trade refers to:
a)
Giving preferential treatment to certain countries
b)
Imposing higher tariffs on specific products
c)
Granting trade privileges to the strongest economy
d)
Extending the best trade terms to all trading partners
|
|
Vikram Mehta answered |
The "Most Favored Nation" (MFN) clause is a principle in international trade where a country extends its best trade terms and conditions, including tariffs and market access, to all other trading partners. It ensures that no country receives better treatment than others in terms of trade.
Which of the following is a benefit of international trade?- a)Increased dependence on domestic production
- b)Reduced competition in the domestic market
- c)Higher prices for consumers
- d)Access to a wider variety of goods and services
Correct answer is option 'D'. Can you explain this answer?
Which of the following is a benefit of international trade?
a)
Increased dependence on domestic production
b)
Reduced competition in the domestic market
c)
Higher prices for consumers
d)
Access to a wider variety of goods and services
|
|
Vikram Mehta answered |
International trade allows countries to access a diverse range of goods and services that may not be available or produced domestically. This provides consumers with a broader selection of products and promotes competition, leading to better quality and more affordable options.
Which of the following trade organizations primarily focuses on North American trade?- a)ASEAN
- b)NAFTA
- c)EU
- d)SAARC
Correct answer is option 'B'. Can you explain this answer?
Which of the following trade organizations primarily focuses on North American trade?
a)
ASEAN
b)
NAFTA
c)
EU
d)
SAARC
|
|
Vikram Mehta answered |
NAFTA was a trade agreement among Canada, Mexico, and the United States, aimed at promoting trade and economic cooperation in North America. It eliminated tariffs and reduced barriers to trade and investment among the member countries.
What is the balance of trade?- a)The difference between a country's exports and imports
- b)The total value of all goods and services produced in a country
- c)The rate at which one currency can be exchanged for another
- d)The amount of money a country owes to foreign creditors
Correct answer is option 'A'. Can you explain this answer?
What is the balance of trade?
a)
The difference between a country's exports and imports
b)
The total value of all goods and services produced in a country
c)
The rate at which one currency can be exchanged for another
d)
The amount of money a country owes to foreign creditors
|
|
Vikram Mehta answered |
The balance of trade is the difference between the value of a country's exports (goods and services sold to other countries) and its imports (goods and services purchased from other countries) over a specific period. If exports exceed imports, there is a trade surplus, and if imports exceed exports, there is a trade deficit.
Which of the following trade agreements aims to reduce trade barriers and promote economic development among Pacific Rim countries?- a)GATT
- b)TPP
- c)OPEC
- d)BRICS
Correct answer is option 'B'. Can you explain this answer?
Which of the following trade agreements aims to reduce trade barriers and promote economic development among Pacific Rim countries?
a)
GATT
b)
TPP
c)
OPEC
d)
BRICS
|
|
Vikram Mehta answered |
The TPP was a trade agreement among 12 countries bordering the Pacific Ocean, aiming to promote economic integration and reduce trade barriers among member nations. It was designed to enhance economic cooperation and deepen ties between the Asia-Pacific region and the Americas.
What is the primary aim of import substitution?- a)To increase the reliance on foreign goods
- b)To encourage exports and reduce imports
- c)To protect domestic industries from foreign competition
- d)To promote the outsourcing of production to other countries
Correct answer is option 'C'. Can you explain this answer?
What is the primary aim of import substitution?
a)
To increase the reliance on foreign goods
b)
To encourage exports and reduce imports
c)
To protect domestic industries from foreign competition
d)
To promote the outsourcing of production to other countries
|
|
Vikram Mehta answered |
Import substitution is an economic policy that aims to promote domestic industries by reducing reliance on imports. Countries implementing this policy impose trade barriers and restrictions on imported goods to protect domestic producers and encourage consumers to buy locally produced goods.
Which trade theory considers the factor endowments (such as labor, capital, and natural resources) of countries to determine trade patterns?- a)Theory of Absolute Advantage
- b)Theory of Comparative Advantage
- c)Heckscher-Ohlin Theory
- d)New Trade Theory
Correct answer is option 'C'. Can you explain this answer?
Which trade theory considers the factor endowments (such as labor, capital, and natural resources) of countries to determine trade patterns?
a)
Theory of Absolute Advantage
b)
Theory of Comparative Advantage
c)
Heckscher-Ohlin Theory
d)
New Trade Theory
|
|
Vikram Mehta answered |
The Heckscher-Ohlin Theory, also known as the factor-proportions theory, asserts that a country will export goods that use its abundant factors of production more intensively and import goods that use its scarce factors more intensively. It explains trade patterns based on a country's factor endowments.
Which of the following best defines "Trade"?- a)Movement of people across borders
- b)Exchange of goods and services between countries
- c)A political agreement between nations
- d)Creation of a new product
Correct answer is option 'B'. Can you explain this answer?
Which of the following best defines "Trade"?
a)
Movement of people across borders
b)
Exchange of goods and services between countries
c)
A political agreement between nations
d)
Creation of a new product
|
|
Vikram Mehta answered |
Trade refers to the exchange of goods and services between nations, regions, or individuals. It plays a crucial role in the economic development of countries and fosters international relations. Through trade, countries can access resources they lack and specialize in producing goods they have a comparative advantage in.
What is the term used to describe a situation where a country can produce a good at a lower opportunity cost than another country?- a)Comparative Advantage
- b)Absolute Advantage
- c)Trade Surplus
- d)Trade Deficit
Correct answer is option 'A'. Can you explain this answer?
What is the term used to describe a situation where a country can produce a good at a lower opportunity cost than another country?
a)
Comparative Advantage
b)
Absolute Advantage
c)
Trade Surplus
d)
Trade Deficit
|
|
Vikram Mehta answered |
Comparative Advantage is the ability of a country to produce a good or service at a lower opportunity cost (in terms of other goods sacrificed) than another country. It is the foundation of international trade as it encourages countries to specialize in producing goods they can produce more efficiently than others.
Chapter doubts & questions for Trade & Commerce - Lucent for GK 2025 is part of UPSC CSE exam preparation. The chapters have been prepared according to the UPSC CSE exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for UPSC CSE 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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