Class 10 Economics Chapter 3 Question Answers - Understanding Economic Development

Q1: What is Globalisation? [CBSE (F) 2017]
Ans: Globalisation is the process of rapid integration or interconnection between countries.

Q2: How are Indian markets transformed with Globalisation?
Ans: The latest models of digital cameras, mobile phones and televisions made by the leading manufacturers of the world are within everyone’s reach. We would not have found such a wide variety of goods in Indian markets even two decades back. In a matter of years, our markets have been transformed.

Q3: What is an MNC?
Ans: A multinational company is a company that owns or controls production in more than one nation.

Q4: How are MNCs able to gain greater profits?
Ans: MNCs set up offices and factories for production in regions where they can get cheap labour and other resources. This is done so that the cost of production is low and the MNCs can earn greater profits.

Q5: Which regions are favourable for MNCs to set up production?
Ans: MNCs set up production where it is close to the markets, where there is skilled and unskilled labour available at low costs and where the availability of other factors of production is assured.

Q6: What do you understand by the term ‘Investment’?
Ans: The money that is spent to buy assets such as land, buildings, machines and other equipment is called ‘Investment’ which would later fetch them profits.

Q7: What is the most common route for MNC’s investment?
Ans: The most common route for MNC’s investment is to buy up local companies and then expand the production. MNCs with huge wealth can do so quite easily.

Q8: How were Parakh foods purchased by an American MNC?
Ans: Cargill Foods, a very large American MNC, has taken over a smaller Indian company Parakh Foods. Parakh foods had five oil refineries, whose control has now shifted to Cargill, who is now the largest producer of edible oils.

Q9: Give examples of industries where production is carried out by a large number of small producers around the world.
Ans: Garments, footwear and sports items are examples of industries where production is carried out by a large number of small producers around the world.

Q10: How are MNCs interacting with local companies in spreading their production?
Ans: There are variety of ways—By setting up partnerships with local companies, by using the local companies for supplies and by closely competing with the local companies or buying them up.

Q11: What is the basic function of foreign trade? [CBSE (Comptt.) 2017]
Ans: Foreign trade creates an opportunity for the producers to reach beyond the domestic markets, i.e., markets of their own countries. Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world.

Q12: Why are Chinese toys so popular in India?
Ans: Buyers in India now have the option of choosing between Indian and Chinese toys. Because of the cheaper prices and new designs, Chinese toys became more popular in the Indian markets.

Q13: Give one advantage to China and disadvantage to India with import of Chinese toys.
Ans: For Chinese toy makers, this provides an opportunity to expand business. Whereas Indian toy makers face losses, as their toys are selling much less.

Q14: How does foreign trade connect markets?
Ans: Choice of goods in the market rises. Prices of similar goods in the two markets tend to become equal. Producers in the two countries now closely compete against each other even though they are separated by thousands of miles. Foreign trade, thus, results in connecting the markets.

Q15: Explain the role of MNCs in globalisation.
Ans: MNCs are playing a major role in the globalisation process. More and more goods and services, investment and technology are moving between countries.

Q16: What is the contribution of improvement in transport technology to stimulate the era of globalisation?
Ans: For the past fifty years, there have been several improvements in transportation technology. This has made much faster delivery of goods across long distances possible at lower costs.

Q17: What is the contribution of information and communication technology in the era of globalisation?
Ans: In recent times, technology in the areas of telecommunication, computers, internet has been changing rapidly. Telecommunication facilities like telegraph, telephone, mobile, fax, etc., help to communicate in remote areas also.

Q18: If Indian Government puts a tax on import of toys, how would it affect the import of Chinese toys?
Ans: Those who wish to import these toys will have to pay tax on this. Because of the tax, buyers will have to pay a higher price on imported toys. Chinese toys will no longer be as cheap in the Indian markets and imports from China will automatically reduce. Indian toy makers will prosper in this situation.

Q19: What is a ‘trade barrier’?
Ans: Tax on imports by the Government is called ‘trade barrier’. It is called a barrier because some restrictions have been set up.

Q20: Why do Governments use trade barriers?
Ans: Governments can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much of each should come into the country.