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International Trade (Part – I)

📆 October 19, 2024

Total Questions: 50

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

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]

Correct Answer: (c) Export-Imports
Solution:Net export is the amount by which the total value of exports of a country surpasses or exceeds its total value of imports.
Net export is an important component of the calculation of the gross domestic product of an economy. If the total exports have a value that is less than the total value of goods and services imported, then it is considered as a positive value of net exports.
Similarly, if the value of exports is less than imports, it is considered to be negative. The positive and negative values of net exports help people witness a trade surplus or a trade deficit in an economy.
A country that receives the trade surplus shows that it gets more money from other countries. In contrast, the trade deficit economy spends more money in the foreign market.
The net export formula can be represented as follows:
Net exports = Value of exports - Value of imports
Where,
The value of exports is the money earned by a country from foreign countries by providing goods and services.
The value of imports is the money spent by a country by availing goods and services from other countries.
Net export serves as an indicator of the economic growth of a country. A high net export amount contributes to the GDP of the nation and also makes the country an attractive destination for conducting business.

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

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]

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.

Importance of Balance of Payments (BoP)

  • Depicts the financial and economic status of a country.
  • Can be used as an indicator to determine whether the country's currency value is appreciating or depreciating.
  • Helps the Government to decide on fiscal and trade policies. Provides important information to analyze and understand the economic dealings of a country with other countries.

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

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.

Importance of Balance of Payments (BoP)

  • Depicts the financial and economic status of a country.
  • Can be used as an indicator to determine whether the country's currency value is appreciating or depreciating.
  • Helps the Government to decide on fiscal and trade policies. Provides important information to analyze and understand the economic dealings of a country with other countries.

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

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.

Importance of Balance of Payments (BoP)

  • Depicts the financial and economic status of a country.
  • Can be used as an indicator to determine whether the country's currency value is appreciating or depreciating.
  • Helps the Government to decide on fiscal and trade policies. Provides important information to analyze and understand the economic dealings of a country with other countries.

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

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.

Importance of Balance of Payments (BoP)

  • Depicts the financial and economic status of a country.
  • Can be used as an indicator to determine whether the country's currency value is appreciating or depreciating.
  • Helps the Government to decide on fiscal and trade policies. Provides important information to analyze and understand the economic dealings of a country with other countries.

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.

 

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:

 

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]

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