Class 10 Economics Chapter 3 Question Answers - Understanding Economic Development

Short Answer Type Questions
Q1: Under what conditions do MNCs set up production units?
OR
Examine any three conditions which should be taken care of by multinational companies to set up their production units. [CBSE Delhi 2017]
OR
Describe any five factors that promote the Multinational Corporations (MNCs) to setup their production units in a particular place. [CBSE (F) 2016]
Ans: MNCs set up production units on the basis of:
(i) Proximity to the markets;
(ii) Availability of skilled and unskilled labour at low cost;
(iii) Availability of other factors of production is assured; and
(iv) Government policies that look after their interests.
(v) Developed infrastructure
(vi) Safety measures. (Any five)

Q2: What are the basic functions of foreign trade?
Ans:

• Foreign trade creates an opportunity for the produces to reach beyond the domestic markets.
• 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.
• For the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced.

Q3: What do you mean by liberalisation of foreign trade?
Ans: (i) Removing barriers or restrictions set by the government is known as liberalisation.
(ii) With the liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export.
(iii) The government imposes lesser restrictions than before and is therefore, said to be more liberal.

Q4: What is the role of WTO in international trade?
Ans: (i) WTO’s aim is to liberalise international trade.
(ii) It establishes rules regarding international trade and sees that these rules are obeyed.
(iii) 164 countries of the world are its members currently.
(iv) It is seen that the developed countries have unfairly retained trade barriers. On the other hand, WTO rules have forced developing countries to remove trade barriers.

Q5: What changes do you find with the arrival of MNCs in the markets?
Ans:

• As consumers in today’s world, some of us have wider choice of goods and services before us.
• The latest models of digital cameras, mobile phones and televisions made by the leading manufacturers of the world are within our reach.
• Every season, new models of automobiles can be seen on the Indian roads.

Q6: What are the effects of foreign trade?
Ans: Effects of foreign trade are as follows:
(i) Chinese have started exporting Chinese plastic toys to India.
(ii) Buyers in India now have the option of choosing between Indian and Chinese toys.
(iii) Because of the cheaper prices and new designs, Chinese toys have become more popular in the Indian markets.
(iv) In the competition between Indian and Chinese toys, Chinese toys prove better. With the result, Indian toy-makers face losses, as their toys are selling less.

Q7: What are MNCs?
Ans: (i) An MNC is a company that owns or controls production in more than one nation.
(ii) These companies set up offices and factories for production in regions where they can get cheap labour and other resources.
(iii) This is done to ensure that the cost of production remains low and MNCs can earn greater profits.

Q8: What is investment? How is foreign investment different from it?
Ans: The money that is spent to buy assets such as land, building, machines and other equipment is called investment.
Investment made by MNCs is called foreign investment. Every investment is made with the hope that the assets will earn profits for these companies.

Q9: What are the benefits of MNCs’ production to the local companies?
OR
Which two benefits local companies get when they set up production in association with MNCs?
OR
How are ‘local companies’ benefited by collaborating with ‘multinational companies’? Evaluate any three benefits. [CBSE Delhi 2017]
Ans: (i) MNCs can provide money for additional investments, like buying new machines for faster production.
(ii) MNCs might bring with them the latest technology for production.
(iii) MNCs also buy some local companies to expand production, since they have wealth exceeding the entire budgets of some of the developing countries.

Q10: How are MNCs spreading their production across the globe?
Ans: There are variety of ways in which the MNCs are spreading their production across the globe such as:
(i) Setting up partnerships with the local companies;
(ii) Using the local companies for supplies; and
(iii) Closely competing with the local companies or buying them.
As a result, production in these widely dispersed locations is getting interlinked.

Long Answer Type Questions
Q11: Describe any four benefits of globalisation to the Indian economy. [CBSE (F) 2017]
Ans: Globalisation has benefitted Indian economy:
(i) Local companies supplying raw materials, etc. to these industries have prospered. Several of the top Indian companies have been able to benefit from the increased competition.
(ii) Investment in newer technology and production methods has raised their production standards. Some industries have gained from successful collaborations with foreign companies. It has enabled some large Indian companies to emerge as multinationals.
(iii) It has also created new opportunities for companies providing services, particularly those involving IT and many new jobs have been created in industries.
(iv) Host of services such as data entry, accounting, administrative tasks, and engineering are now being done cheaply in countries such as India and are exported to the developed countries.

Q12: Which factors have stimulated the globalisation process?
Ans: The following factors have stimulated the globalisation process.
(i) Improvement in transportation: In the last fifty years, there have been a lot of improvements in transportation technology. This has made faster delivery of goods across long distances possible, at lower costs.
(ii) Development in information and communication technology: Technology in the areas of telecommunication and computers has been advancing rapidly.
(iii) Telecommunication: Telecommunication facilities like telephone, telegraph, mobiles, fax are used to connect people in the world. This has been made possible due to satellite communication devices.
(iv) Computers: They have now entered almost in every field of activity. In the amazing world of internet, we can obtain and share information on almost anything.
(v) Internet: Internet also allows us to send instant electronic mail (e-mail) and talk (voice mail) across the world at negligible cost. Even the payment of money from one bank to another can be made through e-banking.

Q13: How was the liberalisation policy gradually adopted in India?
Ans:

• After Independence, the Indian government had put barriers on foreign trade and foreign investment.
• Initially, Indian industries were just coming up after Independence, so competition from imports wouldn’t have allowed these industries to come up.
• In 1999, the government decided that the time had come for Indian producers to compete with the producers around the globe.
• It was felt that competition would improve the performance of domestic producers since they would improve the quality of their products.
• Thus, barriers on foreign trade and foreign investment were removed to a large extent.
• Now, goods could be imported and exported easily and foreign companies could also set up factories and offices here.

Q14: How do MNCs manage the production in other countries?
Ans: (i) MNCs not only sell their finished products globally, but also produce the goods and services globally.
(ii) As a result, production is organised in increasingly complex ways.
(iii) The production process is divided into small parts and spread out across the globe.
(iv) For example, China provides the advantage of being a cheap manufacturing location. Mexico and Eastern Europe are useful for their closeness to the markets in the US and Europe.
(v) India has highly skilled engineers, who can understand the technical aspects of production. It also has educated English-speaking youth, who can provide customer care services. And all this probably can mean 50-60 per cent cost savings for the MNCs.

Q15: Describe the problems created by globalisation for small producers and workers. [CBSE (F) 2017]
Ans: Problems created by globalizations for Small Producers and Workers
(i) Tough competition with the Big Companies.
(ii) Several small units are being shut down.
(iii) Unemployment of Workers.
(iv) In security of Job.
(v) Small producers and exporters try hard to cut their cost due to competition.
(vi) Workers are hired on temporary basis.
(vii) Workers have to put in long working hours and work night shifts.
(viii) Wages are low and forced to work overtime.
(ix) Workers are denied their fair share of benefits brought about by globalisation.

Q16: How did Ford Motors, an MNC, set its foot in India?
Ans: (i) Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over twenty-six countries of the world.
(ii) It came to India in 1995 and spent ` 1,700 crore to set up a large plant near Chennai.
(iii) This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks.
(iv) By the year 2014, Ford Motors was selling 77,000 cars in the Indian markets, while another 77,000 cars were exported from India to South Africa, Mexico and Brazil.
(v) The company wanted to develop Ford India as a component supplying base for its other plants across the globe.

Q17: What is globalisation? What is the role of MNCs in the globalisation process?
Ans: Globalisation is the process of rapid integration or interconnection between countries.
(i) MNCs are playing a major role in the globalisation process.
(ii) More and more goods and services, investments and technology are moving between countries.
(iii) Most regions of the world are in closer contact with each other than a few decades back.

Q18: What are the various ways in which countries can be linked?
Ans: Besides the movement of goods, services, investments and technology, there is one more way in which the countries can be linked.
(i) This is through the movement of people between countries.
(ii) People usually move from one country to another in search of better income, better jobs or better education.
(iii) In the past few decades, however, there has not been much increase in the movement of people between countries due to various restrictions.

Q19: How did rapid improvement in technology stimulate the globalisation process?
OR
Describe the contribution of technology in promoting the process of globalisation. [CBSE Delhi 2017]
Ans: (i) For the past fifty years, several improvements in transportation technology have been made. It has helped in the faster delivery of goods across long distances at lower costs.
(ii) Even more remarkable have been the developments in information and communication technology. Technology in the areas of telecommunications, computers, internet has been changing rapidly.
(iii) Telecommunication facilities like telegraph, telephone including mobile phones or fax, etc., are used to contact one another around the world to access information instantly and to communicate from remote areas.
(iv) There is an amazing world of internet, where we can obtain and share information on almost anything we want to know. Internet also allows us to send instant electronic mail and talk across the world at negligible costs.

Q20: In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry?
Ans: (i) Large MNCs in the garment industry in Europe and America get their products from Indian exporters.
(ii) These large MNCs with worldwide network look for the cheapest goods in order to maximise their profits.
(iii) To get these large orders, Indian garment exporters try hard to cut their own costs.
(iv) Earlier, a factory used to employ workers on permanent basis. Now they employ workers only on a temporary basis, so that they do not have to pay workers for the whole year.
(v) Workers also have to put in very long working hours. They have to work in night shifts on a regular basis during the peak season.
(vi) Wages are low and workers are forced to work overtime to make both ends meet.
(vii) While this competition among the garment exporters has allowed the MNCs to make large profits, workers are denied their fair share of benefits brought about by globalisation.