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External Sector- 3 Video Lecture | Indian Economy for UPSC CSE
FAQs on External Sector- 3 Video Lecture - Indian Economy for UPSC CSE
| 1. What is the external sector? |  |
Ans. The external sector refers to the part of an economy that interacts with the rest of the world through international trade, investments, and financial transactions. It includes exports, imports, foreign direct investment, foreign exchange reserves, and other external economic activities.
| 2. How does the external sector affect a country's economy? | |
Ans. The external sector plays a crucial role in shaping a country's economy. It can impact economic growth, employment, inflation, exchange rates, and overall economic stability. For example, an increase in exports can boost economic growth and create job opportunities, while a large trade deficit can put pressure on the domestic currency and lead to inflation.
| 3. What are the main components of the external sector? | |
Ans. The main components of the external sector are exports and imports of goods and services, foreign direct investment (FDI), portfolio investment, international loans and borrowing, remittances, and foreign exchange reserves held by the central bank. These components reflect the economic interactions between a country and the rest of the world.
| 4. How does a country's external sector affect its balance of payments? | |
Ans. The external sector directly influences a country's balance of payments, which is a record of all economic transactions between residents of the country and the rest of the world. A surplus in the external sector, such as higher exports than imports, leads to a surplus in the balance of payments, while a deficit in the external sector results in a deficit in the balance of payments.
| 5. What are some factors that can impact a country's external sector? | |
Ans. Several factors can impact a country's external sector, including exchange rates, global economic conditions, trade policies of other countries, technological advancements, political stability, and natural disasters. Changes in these factors can influence the competitiveness of a country's exports, the cost of imports, and the overall flow of goods, services, and investments across borders.
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