International Trade (Part – I)

Total Questions: 50

41. Which of the following is included in Balance of Trade? [U.P. P.C.S. (Mains) 2016]

(a) Goods
(b) Services
(c) Transfer of payment
(d) All of the above

Correct Answer: (a) Goods

Solution:Balance of Trade (BoT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. BoT is said to be in balance when exports of goods are equal to the imports of goods. Surplus BoT or trade surplus will arise if country exports more goods than what it imports. Whereas, deficit BoT or trade deficit will arise if a country imports more goods than what it exports. Trade balance includes only visible items, while current account of Balance of Payments (BoP) includes both visibile and non-visible items.

42. Net export equals to: [U.P. R.O./A.R.O. (Mains) 2017]

(a) Export Imports
(b) Export+ Imports
(c) Export-Imports
(d) Exports of services only

Correct Answer: (c) Export-Imports

Solution:The net export is the difference between the monetary value of a nation's total exports and imports over a certain time period. The value of a nation's total export of goods and services minus the value of all the goods and services it imports equal its net exports. A nation that has positive net exports enjoys a trade surplus, while negative net exports mean that nation has a trade deficit.

43. The payment of foreign trade is related with: [M.P.P.C.S. (Pre) 2015]

(a) The merits of import
(b) The merits of export
(c) The multiplier of foreign trade
(d) Balance of Payment

Correct Answer: (d) Balance of Payment

Solution:Imports and Exports both are included in foreign trade. So that, Balance of Payment can't be related alone with 'the merits of imports' or 'the merits of exports'. While the multi- plier of foreign trade defines the amount by which the national income of a country will be raised by a unit increase in exports. Balance of payment is a account of international transactions (in which foreign trade is included) of any country for a specific time period (normally one year). Hence, option (d) is the correct answer.

44. Term 'Balance of Payment' is used in relation to which of the following? [U.P.P.C.S. (Mains) 2012]

(a) Annual sale of a factory
(b) Tax collection
(c) Exports & Imports
(d) None of the above

Correct Answer: (c) Exports & Imports

Solution:The Balance of Payments (BoP) records the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year. The balance of payments includes both the current account and capital account. The current account records exports and imports in goods and services and transfer pay- ments, while the capital account records all international purchases and sell of assets such as money, stocks, bonds, etc.

45. The Balance of Payments (BoP) of a country is a systematic record of: [L.A.S. (Pre) 2013]

(a) all import and export transactions of a country during a given period of time, normally a year
(b) goods exported from a country during a year
(c) economic transaction between the government of one country to another
(d) capital movements from one country to another

Correct Answer: (a) all import and export transactions of a country during a given period of time, normally a year

Solution:The Balance of Payments (BoP) records the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year. The balance of payments includes both the current account and capital account. The current account records exports and imports in goods and services and transfer payments, while the capital account records all international purchases and sell of assets such as money, stocks, bonds, etc.

46. Balance of Payment is defined as: [U.P.P.C.S. (Pre) 1994]

(a) The value of exports minus the value of imports.
(b) The difference between the liabilities and assets of a firm.
(c) The difference between current expenditure and current revenue in the government budget.
(d) Complete record of all economic transactions between the residents of a country and rest of the world.

Correct Answer: (d) Complete record of all economic transactions between the residents of a country and rest of the world.

Solution:The Balance of Payments (BoP) records the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year. The balance of payments includes both the current account and capital account. The current account records exports and imports in goods and services and transfer payments, while the capital account records all international purchases and sell of assets such as money, stocks, bonds, etc.

47. Balance of payment includes: [U.P.P.C.S. (Pre) 2009]

(a) Visible Trade
(b) Invisible Trade
(c) Borrowings
(d) All of the above

Correct Answer: (d) All of the above

Solution:Balance of Payment (BoP) includes all of three: visible trade, invisible trade and borrowings. Visible items include material goods which can be seen or touched, counted and weighted and which is duly recorded at the custom barriers and invisible items, on the other hand, refer to different kinds of services and transfer payments etc. Both visible and invisible items are recorded under current account of BoP. While capital account of BoP represents foreign investments and borrowings.

48. With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? [I.A.S. (Pre) 2014]

1. Balance of trade

2. Foreign assets

3. Balance of invisibles

4. Special Drawing Rights

Select the correct answer using the code given below.

(a) 1 only
(b) 2 and 3
(c) 1 and 3
(d) 1, 2 and 4

Correct Answer: (c) 1 and 3

Solution:Transactions under Current Account of Balance of Payments (BoP) are classified into visible (import and export of goods) and invisible items. Difference between the value of exports and value of imports of goods (visible items) of a country in a given period of time is called Balance of Trade (BoT). Invisible transactions include trade in services and transfer payments etc. Hence, Balance of Trade and Balance of Invisibles constitutes the Current Account.

49. Given below are two statements, one labelled as Assertion (A) and the other as Reason (R). [U.P.R.O/A.R.O. (Re-Exam) (Pre) 2016]

Assertion (A): When the payments made by a country exceeds its receipts from trade of goods, services, transfer and net income, is called Current Account Deficit (CAD). Reason (R): Current Account Deficit (CAD) occurs when a country exports more goods, services and capital.

Choose the correct answer from the code given below.

Code:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true, but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Correct Answer: (c) (A) is true, but (R) is false

Solution:The current account records a nation's transactions with the rest of the world specially its net trade in goods and services, its net earnings on cross-border investment, and its net transfer payments over a defined period of time, such as a year or a quarter. When the payments made by a country exceeds its receipts from trade of goods, services, transfer and net income, it is called Current Account Deficit (CAD). CAD occurs when a country imports more goods, services and capital. Thus, A is true but R is false.

50. What is Current Account Deficit (CAD)? [Chhattisgarh P.C.S. (Pre) 2017]

(a) Excess amount drawn over the total deposit amount in Current Accounts of the Banks
(b) Deficit due to excess of Govt. expenditure over Govt. Revenue in current year
(c) Deficit caused due to excess of total imports over total exports during the year
(d) Loss due to highest cost of production over market price of the commodity
(e) None of these

Correct Answer: (c) Deficit caused due to excess of total imports over total exports during the year

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