International Trade MCQ Questions

Students should go through the International Trade MCQ with Answers provided below. International Trade is an important topic for various commerce and competitive examinations. It’s important to practice as many MCQ Questions with Answers for International Trade as it will help them to practice and gain more expertise. Our team of expert faculty has designed questions with multiple-choice based on the latest examination pattern issued by various institutes. This will help them to gain understanding, have stronger concepts and get a better score in exams.

MCQ with Answers for International Trade

Question. The top two countries that remain the top sources of FDI to India during 2017-19 are
(a) Singapore and Mauritius
(b) USA and Brazil
(c) France and Britain
(d) Bangladesh and Nepal

Question. During the period of the first Five-Year Plan, India’s imports mainly consisted of
(a) Silver
(b) Foodgrains
(c) Pharmaceuticals
(d) None of the above

Question. The net terms of trade refers to
(a) The ratio of unit value index of imports to unit value index of imports.
(b) The ratio of unit value of a commodity to per capita income
(c) The ratio of unit value of a commodity of domestic country to the unit value of a commodity of foreign countries
(d) The ratio of unit value of domestic exports to the unit value of foreign exports

Question. According to classical view, one of the main difference between inter-regional and international trade is
(a) Factor mobility
(b) Wage flexibility
(c) Both (a) and (b)
(d) None of the above

Question. According to Adam Smith, diversification of labour at the international level requires the
(a) Existence of absolute differences in costs
(b) Existence of comparative differences in costs
(c) Existence of least cost combination of factors
(d) Existence of labour involved in production of a commodity

Question. The basic of international trade according to Ricardo is that
(a) A country will export those commodities in which its comparative production costs are high or will import those commodities in which its comparative production costs are less
(b) A country will import those commodities in which its comparative production cost are the same with other countries
(c) A country will export those commodities in which its comparative production costs are less or will import those commodities in which its comparative production costs are high
(d) A country will export those commodities in which its comparative production cost are the same with other countries

Question. According to Ohlin, the comparative cost differences arise because of
(a) Labour cost differences
(b) Factor endowment differences
(c) Exchange rate differences
(d) None of the above

Question. Adam Smith’s theory of international trade is based on
(a) Absolute differences in costs
(b) Homogeneity of labour
(c) Differences of exchange ratios
(d) Mobility of factors of production between countries

Question. The Absolute Advantage theory of international trade was propounded by
(a) Adam Smith
(b) David Ricardo
(c) Alfred Marshall
(d) Lionel Robbins

Question. The ratio between the quantities of a country’s imports to its exports is known as
(a) Commodity or net barter terms of trade
(b) Single factorial terms of trade
(c) Gross barter terms of trade
(d) Double factorial terms trade

Question. J.S.Mill introduced the theory of reciprocal demand to explain
(a) Determination of factor endowments
(b) Determination of equilibrium terms of trade
(c) Determination of availability of resources
(d) Determination of equilibrium in balance of payments

Question. Haberler’s Opportunity cost theory explains the doctrine of comparative cost in terms of
(a) The saving’s curve
(b) The consumption curve
(c) The substitution curve
(d) The supply curve

Question. Among the difference between inter-regional and international trade, the reason for international factor immobility includes
(a) Difference in languages
(b) Difference in occupational skills
(c) Restrictions imposed by foreign country on labour immigration
(d) All of the above

Question. The basics and gains from international trade under the theory of opportunity cost is determined by
(a) Homogeneity of labours
(b) The shape of the substitution curve or production possibility curve under different cost conditions
(c) Imperfect competition in factor and commodity markets
(d) Change in technology

Question. Adam Smith favoured
(a) Free trade among nations
(b) Regulation of trade among nations
(c) Closed economies
(d) None of the above

Question. Which of the following is the cause of international trade as per Heckscher-Ohlin trade theory?
(a) Difference in factor availability
(b) Difference in cost of production
(c) Difference in trade
(d) Difference in currency system

Question. The theory of comparative advantage in international trade was propounded by
(a) Kindleberger
(b) Adam Smith
(c) David Ricardo
(d) J.S. Mill

Question. The price criterion if the H-O theory of trade lays down that
(a) A country having labour relatively cheap and capital relatively costly is capital-abundant
(b) A country having capital relatively cheap and labour relatively costly is labour-abundant
(c) A country having both capital and labour cheap is capital-abundant
(d) A country having capital relatively cheap and labour relatively costly is capital abundant

Question. The main reason for different nations to enter into trade is that
(a) Every nation can produce by itself all the commodities and services required by its citizens/people
(b) Some nations are capable to produce all the goods and services required by its people
(c) No country has the capacity to produce all the goods and services required by its citizens/people
(d) None of the above

Question. According to the absolute differences in cost theory of trade
(a) No country should specialize in the production of any commodity
(b) Every country should specialize in the production of commodities which it can produce more cheaply than other countries and exchange it for commodities which are cheaper in other countries
(c) Every country should specialize in production of goods which it can produce at higher cost than other countries and exchange it for commodities which are costlier than other countries
(d) All of the above

Question. The Comparative theory of international trade is based on
(a) Constant costs
(b) Variable costs
(c) Increasing costs
(d) Decreasing costs

Question. The H-O theory assumed the prevalence of
(a) Monopolistic forms of market
(b) Perfect competition
(c) Oligopolistic forms of market
(d) Monopoly

Question. According to comparative advantage theory
(a) Capital is the only factor of production
(b) Labour is the only factor of production
(c) Both capital and labour are factors of production
(d) None of the above

Question. Heckscher-Ohlin theory of trade is based on
(a) Two-by-two-by-two model
(b) Three-by-three-by-three model
(c) Four-by-four-by-four model
(d) All of the above

Question. In Ricardian theory of international trade, the only factor of production is
(a) Land
(b) Labour
(c) Capital
(d) All of the above

Question. The production possibility curve represents
(a) The supply side
(b) The demand side
(c) Combination of four commodities
(d) None of the above

Question. Relative factor abundance in H-O theory of trade can be defined in terms of
(a) The physical & price criterion of relative factor abundance(and the price criterion of relative factor abundance)
(b) Perfect mobility of factors of production
(c) Production governed by increasing returns to scale
(d) Similar factor intensities

Question. If a country has favourable terms of trade, it will claim
(a) A larger share in the distribution of gains
(b) An equal share in the distribution of gains
(c) A smaller share in the distribution of gains
(d) None of the above

Question. International trade refers to
(a) Domestic trade
(b) Inter-regional trade
(c) Trade between two nations or countries
(d) Internal trade

Question. The classical theory of international trade is based on
(a) Labour theory of value
(b) Less than full employment
(c) Exchange rate differences
(d) None of the above

Question. Which factor does not influence terms of trade?
(a) Devaluation
(b) Overpopulation
(c) Trade policy
(d) Immigration

Question. Gains from trade depends on
(a) Relative strength of elasticity of demand for export and import good
(b) Size of the country
(c) Change in technology
(d) All of the above

Question. The principle of reciprocal demand was introduced by
(a) J.S.Mill
(b) Lionel Robbins
(c) Alfred Marshall
(d) Adam Smith

Question. Terms of trade expresses the relationship between
(a) Balance of payments between two countries
(b) The export price and import price of a country
(c) Gains and loss of a country in international trade
(d) None of the above

Question. The difference in price ratios of two commodities in the two trading countries is
(a) Potential gains
(b) Partial gains
(c) Actual gains
(d) None of the above

Question. An increase in the index of income terms of trade implies that
(a) A country cannot import more goods in exchange for its exports
(b) A country can import more goods in exchange for its exports
(c) A country cannot export more goods in exchange for its imports
(d) None of the above

Question. The production possibility curve under increasing opportunity costs is concave to the origin because
(a) The opportunity cost of leaving a unit of one commodity to have an additional unit of the other is constant
(b) Each country completely specializes in the production of only one commodity after trade
(c) They are the same at all points
(d) When a country in the production of one commodity in which it has comparative advantage, its opportunity costs increases

Question. The importance of international trade includes
(a) Adverse terms of trade
(b) Lack of industrial diversification
(c) Balance of Payments deficit
(d) None of the above

Question. According to physical criterion of the H-O theory of trade, a country is said to be relatively capital abundant if and only if
(a) A country is having capital relatively cheap and labour relative costly
(b) A country is endowed with a higher proportion of capital to labour than the other country
(c) A country is having labour relatively cheap and capital relatively costly
(d) A country is endowed with a higher proportion of labour to capital than the other country

Question. The terms of trade refers to the rate
(a) At which the goods of one country is exchanged for the goods of another country
(b) At which the price of a country’s import is calculated
(c) At which the price of a country’s export is calculated
(d) All of the above

Question. The types of terms of trade does not include
(a) Utility terms of trade
(b) Real cost terms of trade
(c) Productive capacity terms of trade
(d) Double factorial terms of trade

Question. The difference in the domestic cost ratios of producing two commodities in two countries is known as
(a) Actual gains
(b) Partial gains
(c) Potential gains
(d) Price gains

Question. The two types of gains from trade are
(a) Internal and external gains
(b) Static and dynamic gains
(c) Relative and reactive gains
(d) All of the above

Question. In case of Mill’s theory, where country A produces good X and country B produces good Y, if country A’s demand for product Y increases, then country A’s offer curve will
(a) Shift to the left
(b) Shift to the right
(c) Shift backwards
(d) Remain constant

Question. In the modern trade theory, the gains from international trade are clearly differentiated between
(a) The gains from exchange and the gains from specialization
(b) The gains from exchange and income
(c) The gains from exchange and price
(d) All of the above

Question. Under the gains from international trade, the gains from exchange is also known as the
(a) Partial gains
(b) Consumption gains
(c) Domestic gains
(d) Price gains

Question. In modern trade theory, the gains from specialization is also known as the
(a) Constant gains
(b) Consumption gains
(c) Production gains
(d) Internal gains

Question. According to the Heckscher-Ohlin theory of trade, the most important cause of difference in relative commodity prices and trade between nations is a difference in
(a) Factor endowment
(b) Tastes
(c) Demand conditions
(d) All of the above

Question. Under constant opportunity cost, the production possibility curve is
(a) Convex to the origin
(b) Straight line
(c) Concave to the origin
(d) Upward sloping

Question. According to the theory of comparative advantage, countries gain from trade, because
(a) Trade makes firms more competitive, reducing their market power
(b) Every country has an absolute advantage in producing something
(c) World output can rise when each country specializes in what it does relatively best
(d) None of the above

Question. The terms of trade of a country improves when
(a) The import price of a country relatively rises to its export prices
(b) The import price of a country is the same with its export prices
(c) The export price of a country does not rise in relation to its import prices
(d) The export price of a country relatively rises to its import prices

Question. When a country’s import price relatively rises to its export prices,
(a) The terms of trade of a country remains the same
(b) The terms of trade of a country becomes worsened
(c) The terms of trade of a country improves
(d) None of the above

Question. The various methods of measuring gains from trade does not include
(a) Haberler’s approach
(b) Ricardo’s-Malthus approach
(c) Modern approach
(d) Mill’s approach

Question. The concept of single factoral terms of trade was developed by
(a) Jacob Viner
(b) G.S. Dorrance
(c) G.Haberler
(d) F.W. Taussig

Question. Mill’s theory of reciprocal demand is based on one of the assumptions that
(a) There is less than full employment
(b) There is imperfect competition
(c) The commodities are produced under the law of constant returns
(d) There are transport costs involved

Question. When the export prices of a country relatively rises to its import prices, its terms of trade are said to have
(a) Deteriorated
(b) Improved
(c) Remain constant
(d) None of the above

Question. The term ‘terms of trade’ between two countries refers to
(a) The barter terms of trade
(b) The quantity of exports
(c) Both (a) and (b)
(d) The price

Question. The theory of gains from trade was at the core of the
(a) Technical progress
(b) Change in employment
(c) Modern theory of international trade
(d) Classical theory of international trade

Question. According to Jacob Viner, the classical economists measured the gains from trade in terms of
(a) Increase in national income
(b) Difference in comparative costs
(c) Terms of trade
(d) All of the above

Question. The terms of trade measures
(a) The terms of exchange between a unit of import and a unit of export
(b) The terms of exchange between a unit of one currency with a unit of other currencies
(c) The terms of exchange between a unit of one’s commodity with a unit of other commodities
(d) None of the above

Question. Under Liberalized Exchange Rate Management Scheme, how much is the receipts on current account could be converted freely into rupees at market determined exchange rate?
(a) 30 %
(b) 40 %
(c) 50 %
(d) 60 %

Question. The classical theorists believed that the gains from trade resulted from
(a) Stabilisation of price level
(b) Increased production and specialization
(c) Exchange and specialization
(d) Perfect competition

Question. The modern economists considered the gains from trade resulted from
(a) Increased production and specialization
(b) Increased competition
(c) Exchange and specialization
(d) All of the above

Question. Prof. Ronald Findlay modified Ricardo’s measure of gains from trade using
(a) A straight line
(b) Balance of payments
(c) The community indifference curve
(d) Short-term and long-term lendings and borrowings

Question. The income terms of trade is called the
(a) Capacity to export
(b) Capacity to import
(c) Capacity to change
(d) Capacity to remain constant

Question. The tariff that maximizes a country’s welfare is called the
(a) Double column tariff
(b) Maximum and minimum tariff
(c) Optimum tariff
(d) None of the above

Question. A quota which established thorough mutual agreements or negotiation between countries is
(a) Allocated quota
(b) Unilateral quota
(c) Import-export quota
(d) Bilateral quota

Question. Effects of tariffs included
(a) Income effect
(b) Effect on demand
(c) Effect on supply
(d) All of the above

Question. Mill’s theory of reciprocal demand indicates a
(a) Country’s demand for one commodity in terms of the quantities of the other country it is prepared to give up in exchange
(b) Country’s supply of a commodity in terms of the quantities of the other country it is prepared to give up in exchange
(c) Country’s balance of payments
(d) Country’s labour cost

Question. The gains from trade refers to
(a) A duty levied on goods when they enter and leave a country’s national boundary
(b) A tariff that maximizes a country’s welfare
(c) Net benefits or increases in goods that a country gets by trading with other countries
(d) The demand and supply curve of a country

Question. The ratio between the price of a country’s export goods to its import goods is called
(a) Income terms of trade
(b) Gross barter terms of trade
(c) Real cost terms of trade
(d) Commodity or net barter terms of trade

Question. When a uniform rate of duty is imposed on all similar commodities irrespective of the country from which they are imported, it is called
(a) Single-column tariff
(b) Protective tariff
(c) Conventional tariff
(d) Double-column tariff

Question. A quota system which allows a certain specified quantity of a commodity to be imported duty free or at a low rate of import duty is
(a) Bilateral quota
(b) Global quota
(c) Tariff or custom quota
(d) Unilateral quota

Question. The necessity of absolute differences in costs of international trade is associated with
(a) Comparative advantage theory
(b) Opportunity Cost theory
(c) Absolute advantage theory
(d) Theory of Reciprocal Demand

Question. The opportunity cost theory considers
(a) Labour as the only factor of production
(b) Capital as the only factor of production
(c) Both labour and capital
(d) Land, labour and capital

Question. The income terms of trade is
(a) The net barter terms of trade of a country multiplied by its export volume index
(b) The ratio between the quantities of a country’s imports and exports
(c) The ratio between the price of a country’s export goods and import goods
(d) None of the above

Question. The tariff rates which are based on trade agreements or treaties with other countries is known as
(a) Revenue tariffs
(b) Protective tariffs
(c) Multiple column tariff
(d) Conventional tariff

Question. Which of the following is not included in the effects of quotas
(a) Price effect
(b) Consumption effect
(c) Income effect
(d) Protective effect

Question. The current account BOP deficit will be beneficial for the economy if foreign borrowings are used to finance
(a) Transportation
(b) Shipping goods
(c) Real investment
(d) Small and medium enterprises

Question. In the equation Y=C+I+G+(X-M), G denotes
(a) General expenditure
(b) Government expenditure
(c) Expenditure on gold
(d) Expenditure on goods

Question. If export is less than import, there is a ….. in balance of trade.
(a) Surplus
(b) Deficit
(c) Favourable
(d) Balance

Question. imposition of a tariff improves the terms of trade of the imposing country but reduces its
(a) Commodity prices
(b) Volume of trade
(c) Cost of production
(d) None of the above

Question. A tariff results in an improvement in terms of trade on one hand and on the other hand, increases the
(a) Demand of the commodity
(b) Price of the commodity
(c) Level of welfare
(d) Gains from trade

Question. The positive effect of a tariff is, when there is an increase in the welfare of a country due to
(a) An improvement in the terms of trade
(b) An increase in its volume of trade
(c) A reduction in its volume of trade
(d) A decrease in its volume of trade

Question. Ad valorem tariffs are
(a) Duties levied per physical unit of the commodity imported
(b) Duties levied as fixed percentage of the value of the imported commodity
(c) Duties which tend to vary with the prices of the imported commodities
(d) None of the above

Question. The slope of the production possibility curve under Opportunity costs theory is also called
(a) The average production curve
(b) Marginal rate of transformation
(c) Indifference curve
(d) Isoquant curve

Question. The term ‘factor intensity’ refers to
(a) The relative proportion of two commodities produced in a given period
(b) The relative amount of resources each country possesses
(c) The relative proportion of various factors of production used to produce a commodity
(d) None of the above

Question. The fundamental reason why different countries involve in transactions with one another is the
(a) Theory of absolute differences in costs
(b) Production of goods
(c) Gains from trade
(d) Supply of goods

Question. On the basis of origin and destination of goods, tariff may be classified into
(a) Specific duties, ad valorem duties and compound duties
(b) Single-column tariff, double-column tariff and triple column tariff
(c) Export duties, import duties and transit duties
(d) All of the above

Question. A trade policy without tariffs and other quantitative restrictions blocking the movement of goods between countries is
(a) Import policy
(b) Export policy
(c) Free trade policy
(d) Exim policy

Question. According to Adam Smith, free trade is the result of
(a) Division of labour and specialisation both at the national and international level
(b) Specialisation only at the national level
(c) Division of labour and specialisation at the national level only
(d) Division of labour only at the international level

Question. According to Ricardo, trade is possible between two countries when
(a) One country has absolute advantage in production of both commodities
(b) One country has an absolute advantage for production of both commodities but comparative advantage in the production of one commodity than the other country
(c) One country does not have any advantage in the production of both commodities
(d) A country does not have any line of production

Question. David Ricardo believed that the international trade is governed by
(a) Absolute cost advantage only
(b) Absolute cost and comparative cost advantage
(c) Comparative cost advantage
(d) Mobility of factors

Question. Protection refers to a policy where
(a) Export industries are to be protected from competition
(b) Domestic industries are to be protected from foreign competition
(c) Optimum utilization of resources takes place
(d) There is optimization of consumption

Question. A tax or duty levied on goods when it enters or leave the national boundary of a country is called
(a) Tariff
(b) Quotas
(c) External economics
(d) Balance of payment

Question. Import quotas may be fixed either in terms of quantity or
(a) The supply of the product
(b) The value of the product
(c) Consumption of the product
(d) Demand of the product

Question. When import quotas are fixed after negotiations between the importing and exporting countries, it is known as
(a) Import licensing
(b) Mixing quota
(c) Bilateral quota
(d) Unilateral quota

Question. The objective of import quotas include
(a) To protect domestic industries from foreign competition by restricting imports
(b) To stabilize and maintain the external price level by regulating exports
(c) To correct adverse balance of payments restricting exports
(d) None of the above

Question. Under the unilateral quota system, the autonomously fixed quota may either be
(a) Fixed or variable
(b) Positive or negative
(c) Global or allocated
(d) All of the above

Question. When government levies import duties which varies with prices of commodities imported , it is called
(a) Ad valorem duty
(b) Specific duty
(c) Compound duty
(d) Sliding scale duty

Question. Which of the following is not the effect of tariff?
(a) Balance of payments effect
(b) Terms of trade effect
(c) competive effect
(d) none of the above

Question. Prof. Kindleberger calls the combined protective and consumption effect as
(a) Cost of the tariff
(b) Trade effect
(c) Income effect
(d) Revenue effect

Question. A tariff or custom quota may either be
(a) Increasing or decreasing
(b) Fixed or variable
(c) Unilateral or bilateral
(d) Autonomous or agreed

Question. The system devised to administer the types of quotas is
(a) Tariff quota
(b) Import licensing
(c) Export duties
(d) None of the above

Question. The actual exchange ratio between two countries will depend upon the
(a) Supply
(b) Price
(c) Reciprocal demand
(d) All of the above

Question. In world markets, the actual gain is always less than the potential gain since there is always
(a) Perfect completion
(b) Imperfect completion
(c) Stability
(d) None of the above

Question. The quota system in which domestic producers of a quota fixing country are required to make use of both domestic raw materials and a specified proportion of imported raw materials to produce a product
(a) Bilateral quota
(b) Tariff or custom quota
(c) Import quota
(d) Mixing quota

Question. Once import quota is levied on a commodity, the domestic price of the commodity
(a) Fluctuates
(b) Remains constant
(c) Decreases
(d) Rises

Question. If a country has fundamental deficit in in the balance of payments, it should resort to
(a) Exchange control
(b) Devaluation of its currency
(c) Inflation
(d) Loans

Question. Under the redistribution effect of tariff, the loss of consumer’s surplus is neither transferable to the produces nor to the government and is called by Kindleberger as the
(a) Deadweight loss of the tariff
(b) Cost of the tariff
(c) Both (a) and (b)
(d) All of the above

Question. Under the effects of a tariff under partial equilibrium analysis, the revenue effect is the change in government receipts due to
(a) Producer’s surplus
(b) Consumer’s satisfaction
(c) Imposition of tariff
(d) Loss of consumer’s surplus

Question. The increase in the domestic production of a commodity due to imposition of a tariff is
(a) Protective or production
(b) Consumption effect
(c) Terms of trade effect
(d) Competitive effect

Question. Capital account includes
(a) Invisible export
(b) Long-term capital transaction
(c) Invisible import
(d) All of the above

Question. Balance of trade includes
(a) Visible items
(b) Invisible items
(c) Both visible and invisible items
(d) None of the above

Question. A country which gives loans and grants on a large scale to other countries has
(a) A surplus in its BOP on capital account
(b) A deficit in its BOP on capital account
(c) A surplus in its BOP on current account
(d) A deficit in its BOP on its current account

Question. The tariffs or duties levied upon goods originating from abroad and scheduled for the home country are
(a) Exim duties
(b) Import duties
(c) Export duties
(d) None of the above

Question. High tariffs have the effect of restricting
(a) The volume of international trade
(b) The price of goods
(c) The quantity of goods
(d) All of the above

Question. A tariff or import duty which are a combination of the ad valorem and specific duty
(a) Transit duty
(b) Sliding scale duty
(c) Revenue tariff
(d) Compound duty

Question. ‘twin deficits’ refer to revenue deficit and
(a) Capital deficit
(b) Capital account BoP deficit
(c) Current account BoP deficit
(d) None of the above

Question. Measurement of deficit or surplus in the balance of payments in in international transaction is in a given year is
(a) Balance of payments
(b) Balance of trade
(c) Transfer payments to foreigners
(d) None of the above

Question. Specific tariffs are assessed
(a) On the value of product
(b) On the basis of subsidies
(c) On the basis of physical weight
(d) On the basis rate fixed by the government

Question. There is an improvement in the welfare of country only when the
(a) Positive effect of a tariff is lesser than its negative effect
(b) Positive effect is larger than its negative effect
(c) Positive effect of a tariff is equal to its negative effect
(d) None of the above

Question. Overvaluation of domestic currency makes
(a) Foreign goods cheaper and exports dearer in foreign countries
(b) Foreign goods dearer and exports cheaper in foreign countries
(c) Domestic goods cheaper and foreign goods dearer
(d) None of the above

Question. Devaluation encourage
(a) Exports
(b) Imports
(c) Both exports and imports
(d) None of the above

Question. The difference between exports and imports of a country is its
(a) Balance of visible trade
(b) Balance of invisible trade
(c) Balance of payments
(d) None of the above

Question. The most important items in the current account are
(a) Foreign aid and pensions
(b) Private remittances and gifts
(c) Merchandise exports and imports
(d) Transportation and insurance

Question. Which of the following is/are not the policy measure/measures to correct deficit in Balance of Payments?
(a) Fiscal and Monetary
(b) Structural reforms
(c) External financing
(d) Issuing new currency

Question. Gold imports had increased during 1992-99 due the repeal of the Gold Control Order in
(a) 1990
(b) 1991
(c) 1992
(d) 1993

Question. Since 1950, India’s foreign trade has undergone important changes signifying that it has entered into
(a) Unilateral trade
(b) Bilateral trade
(c) Multilateral trade
(d) None of the above

Question. Lending to foreign countries represents
(a) Capital inflows
(b) Capital outflows
(c) Services outflows
(d) Services inflows

Question. Payment to foreign country is a
(a) Credit transaction
(b) Debit transaction
(c) Internal transaction
(d) External transaction

Question. Under direct control measures, the government aims at limiting
(a) The volume of imports
(b) The volume of exports
(c) Both imports and exports
(d) None of the above

Question. Given the foreign exchange rate and prices in a country, an increase in the value of exports causes an increase in
(a) Expenditures
(b) Incomes
(c) Investments
(d) Employment

Question. Devaluation results in
(a) Increase in domestic price of imports and decrease in foreign price of exports
(b) Increase in foreign price of exports and decrease in domestic price of imports
(c) Decrease in domestic price of imports and increase in foreign price of exports
(d) None of the above

Question. The physical limitation of quantities of different products to be imported from foreign countries within a specified period of time is called
(a) Revenue tariff
(b) Gains from trade
(c) Import quota
(d) Optimum tariff

Question. Import quotas include
(a) Ad valorem duty
(b) Tariff or custom quota
(c) Specific duty
(d) Compound duty

Question. The effects of quota under partial equilibrium include
(a) Redistributive effect
(b) Consumption effect
(c) Price effect
(d) All of the above

Question. Undervaluation of currency encourages
(a) Imports
(b) Exports
(c) Investments
(d) None of the above

Question. The equation Rf-Pf <0 denotes
(a) Surplus in balance of payments
(b) Deficit in balance of payments
(c) Equilibrium in balance of payments
(d) None of the above

Question. By restricting imports through the quota system, the deficit is
(a) Reduce
(b) Increase
(c) Improve
(d) None of the above

Question. Tariff can be levied upon
(a) Export only
(b) Import only
(c) Both exports and imports
(d) Partly exports partly imports

Question. On the basis of retaliation, tariffs can be of the types of
(a) Revenue and protective tariffs
(b) Retaliatory and countervailing tariffs
(c) Non-discriminatory and discriminatory tariffs
(d) Double column or multiple tariffs

Question. A deficit in BOP occurs when
(a) Credit>debit
(b) Credit<debit
(c) Credit=debit
(d) None of the above

Question. Fundamental disequilibrium is
(a) A short-term nature
(b) A medium-term nature
(c) A long-term nature
(d) None of the above

Question. The principal reasons for the sluggishness of exports during 1980s was
(a) Domestic supply constraints
(b) Domestic demand constraints
(c) International supply constraints
(d) International demand constraints

Question. The overall exports of India (merchandise and service) during April-May 2019-20 are estimated to have a positive growth over the same period last year is
(a) 2.32 %
(b) 3.32%
(c) 4.32%
(d) 5.32%

Question. Which of the following is an export item/items that shows a positive growth in May 2019?
(a) Fertilizers
(b) Vegetable oils
(c) Transport equipment
(d) Drugs & Pharmaceutical

Question. Deflation as a measure of correcting deficit in BOP tends to make
(a) domestic goods relatively cheaper to foreign goods
(b) domestic goods relatively dearer to foreign goods
(c) foreign goods relatively cheaper to domestic goods
(d) foreign goods relatively dearer to domestic goods

Question. in 1991, India devalued its currency by 18 per cent to
(a) 19%
(b) 20%
(c) 21%
(d) 22%

Question. Invisible exports and imports are the component of
(a) Current account
(b) Capital account
(c) Savings account
(d) None of the above

Question. The slow growth of exports during 2004-2007 was the result of
(a) The depreciation of rupee against dollar
(b) The appreciation of rupee against dollar
(c) Increased in the general price level
(d) None of the above

Question. The concept of gross barter terms of trade was introduced by
(a) Jacob Viner
(b) Adam Smith
(c) Lionel Robbins
(d) F.W. Taussig

Question. A single factoral terms of trade shows that a country’s factoral terms of trade improve as productivity
(a) Remains constant in its export industries
(b) Improves in its export industries
(c) Deteriorates in its export industries
(d) Increases in its import industries

Question. The concept of commodity or net barter terms of trade has been used by economists to measure
(a) The gains from domestic trade
(b) The gains from internal trade
(c) The gains from international trade
(d) The gains from prices

Question. The BoP situation does not deteriorate so long as
(a) The primary deficit is under control
(b) The trade deficit is under control
(c) The fiscal deficit is under control
(d) Monetary deficit is under control

Question. During the period of 1950-51, the traditional exports like tea, jute and cotton textiles formed
(a) 45 per cent of the total exports
(b) 50 per cent of the total exports
(c) 55 per cent of the total exports
(d) 60 per cent of the total exports

Question. Exports that are estimated on free on board (f.o.b.) basis signifies that
(a) the transportation costs, costs of insurance etc. are not included
(b) the transportation costs, costs of insurance etc. are included
(c) both (a) and (b)
(d) none of the above

Question. Imports in balance of payments account are shown as a
(a) Negative item
(b) Positive item
(c) Invalid item
(d) None of the above

Question. Which of the following account does not included in the Reserve account?
(a) IMF
(b) SDR
(c) Reserve and monetary gold
(d) Savings

Question. Exchange rate depreciation reduces
(a) The value of home currency in relation to foreign currency
(b) The value of foreign currency in relation to a home currency
(c) Both the values of home currency and foreign currency
(d) None of the above

Question. Imports that are estimated on carriage, insurance and freight (c.i.f.) basis signifies that
(a) the transportation costs, costs of insurance and freight get included.
(b) the transportation costs, costs of insurance and freight get excluded.
(c) Both (a) and (b)
(d) None of the above

Question. The Indian rupee was made a freely convertible currency on current account since the year
(a) 1981
(b) 1991
(c) 1994
(d) 2004

Question. Which of the following statements about the direction of India’s foreign trade is correct?
(a) The share of Asia and ASEAN in total trade has increased significantly
(b) The share of Asia and ASEAN in total trade has decreased significantly
(c) The share of Asia and ASEAN remain constant over the years
(d) The share of Asia and ASEAN is highly fluctuating

Question. NRI deposits are
(a) Major source of capital inflows into India
(b) Not a source of capital inflows into India
(c) Negligible source of capital inflows into India
(d) None of the above

Question. The biggest exporter of goods to India during 2018-190 is
(a) USA
(b) UAE
(c) China
(d) Japan

Question. The biggest trading partner of India is
(a) USA
(b) UAE
(c) China
(d) Saudi Arabia

Question. The category that do not includes in the balance of payments account is/are
(a) The current account
(b) The capital account
(c) The official settlements account
(d) The savings account

Question. The expression (X-M) denotes
(a) The balance of trade
(b) The balance of payments
(c) The domestic trade
(d) None of the above

Question. If the difference between exports and imports is zero
(a) Balance of trade balances
(b) Balance of payments balances
(c) Capital account equals current account
(d) None of the above

Question. Since the inception of planning era in 1951, India has been facing the problem of
(a) Trade deficit
(b) Current account deficit
(c) Both (a) and (b)
(d) None of the above

Question. To make the exchange rate more realistic and to encourage exports and discourage imports, the Rupee was devalued in
(a) 1991
(b) 1992
(c) 1996
(d) 1998

Question. A systematic record of receipts and payments in international transactions of a country in a given year is called
(a) Balance of trade
(b) Balance of payments
(c) Terms of trade
(d) Capital account

Question. In the equation B=Rf-Pf, Pf represents
(a) Payments made by foreigners
(b) Payments made to foreigners
(c) Payments made to residents of a country
(d) Payments made to exporters

Question. The trade deficit India experienced in 1990-91 was mainly due to
(a) High growth rate of exports
(b) High growth rate of imports
(c) High growth rate of population
(d) None of the above

Question. Rupee was made convertible for all trade in merchandise in
(a) March 1991
(b) March 1992
(c) March 1993
(d) March 1994

Question. India’s top import item is
(a) Coal
(b) Gold
(c) Fertilizer
(d) Crude oil

Question. India’s top export item is/are
(a) Mineral, fuels, oils, etc
(b) Gold
(c) Precious or semi-precious stones
(d) Fertilizers

Question. The most important item of import for India in terms of value is
(a) Mobile handset
(b) POL
(c) Gold
(d) Electronic goods

Question. Rupee is non-convertible in
(a) Current account
(b) Capital account
(c) Both (a) and (b)
(d) None of the above

Question. Which of the following is not a part of capital account?
(a) Lending to foreign countries
(b) Direct investments in foreign countries
(c) Transfer payments
(d) None of the above

Question. As per the latest press release by the RBI dated 14th June, 2019, exports in April 2019 registered a positive growth of
(a) 2.84%
(b) 3.84 %
(c) 4.84 %
(d) 5.84%

Question. As per the latest press release by the RBI dated 14th June, 2019, imports in April 2019 registered a positive growth of
(a) 2.46 %
(b) 3.46 %
(c) 4.46 %
(d) 5.46 %

Question. When government imposed tariffs, it results in improvement of
(a) Balance of trade situation
(b) Balance of payments situation
(c) International transactions
(d) Domestic transactions

Question. The widening of the Current Account Deficit during 2018-19 was on account
(a) A higher trade deficit
(b) A lower trade deficit
(c) A higher fiscal deficit
(d) A lower fiscal deficit

Question. India figures among the top ….global exporters and importers of services.
(a) Five
(b) Seven
(c) Ten
(d) Twenty

Question. Foreign investment inflows help to mitigate the pressure on the overall
(a) Balance of Trade
(b) Balance of Payments
(c) International trade
(d) Fiscal deficit

Question. India’s foreign trade policy during the late 1950s was often termed as
(a) Import pessimism
(b) Export pessimism
(c) Import optimism
(d) Export optimism

Question. Which of the following an import item/items that shows a negative growth in May 2019?
(a) Vegetable oils
(b) Drugs & Pharmaceutical
(c) Engineering goods
(d) Electronic goods

Question. The full form of EXIM is
(a) Exchange and Import
(b) Export-Import
(c) Exported and Imported
(d) None of the above

Question. Which of the following manages and monitors India’s foreign exchange rate in order to correct deficit in BoP?
(a) The Reserve Bank of India
(b) The Government of India
(c) The Securities and Exchange Board of India
(d) The Ministry of External Affairs

Question. Which of the following is not a type of disequilibrium in BOP?
(a) Temporary disequilibrium
(b) Fundamental disequilibrium
(c) Structural disequilibrium
(d) Constant disequilibrium

Question. According to Exports data during 2011-12 (April-June), country with the largest importer of Indian goods was
(a) UAE
(b) China
(c) Indonesia
(d) Europe

Question. Under the Liberalized Exchange Rate Management System (LERMS), the rupee got a partial convertibility in the ratio
(a) 80:20
(b) 70:30
(c) 60:40
(d) 50:50

Question. The huge trade deficit India experienced during the 1980s was mainly due to
(a) Slow growth of exports and fast rise in imports
(b) Slow growth of imports and fast rise of exports
(c) Increased in defence expenditure
(d) Inflation

Question. An increase in domestic production of goods due to imposition of import quota is called
(a) Protective or production effect
(b) Consumption effect
(c) Revenue effect
(d) Price effect

Question. Which of the following items is not included in the invisible items of balance of payments?
(a) Shipping
(b) Insurance
(c) Export and import of goods
(d) None of the above

Question. In balance of payments account, all goods exported and imported are recorded in
(a) Capital accounts
(b) Merchandise account
(c) Current account
(d) Savings account

Question. The H-O theory of international trade was propounded by Ohlin in
(a) 1932
(b) 1933
(c) 1934
(d) 1935

Question. Community indifference curves have the same characteristics as
(a) Transformation curve
(b) Offer curve
(c) Indifference curve
(d) Production possibility curve

Question. The factor price ratio(PC/PL)A < (PC/PL)B of countries A & B implies
(a) Country A is abundant in labour
(b) Country B is abundant in capital
(c) Country B is abundant in labour
(d) Country A is abundant in capital

Fill in the blanks:

Question. The overall trend of imports reflects that India has been becoming an ……… country. (import promotion/agricultural/industrialized) 

Question. The increase in the value of imports was largely due to the increase in prices of ……..,oil and lubricants.(petroleum/foodgrains/machinery) 

Question. Jacob Viner called the net barter terms of trade as ______________ terms of trade. (Income/commodity/utility) 

Question. The terms of trade will be favourable for a country if ____________________ where, M=imports,X=exports and P=Price. (Mp>Xp/Xp=Mp/Xp>Mp) 

Question. The actual ratio of exchange between two countries depends upon ______________. (price/reciprocal demand/demand) 

Question. The widening of trade deficit was the outcome of ……export growth rates. (high/slow/fast) 

Question. The H-O theory is a _______________ model. (two-by-two-by-two/two-by-two-by three/three-by-three-by-three) 

Question. The shape of production possibility curve under different cost conditions determines the basis and the __________ from international trade under opportunity cost theory. (cost/gains/supply) 

Question. A country will import those commodities in which its comparative ________________ is the least. (disadvantage/advantage/mobility) 

Question. The production possibility curves under decreasing opportunity costs are _________________ to the origin. (convex/concave/constant) 

Question. Under the ………….Scheme, certain imports were permitted against export entitlement. (Exim Scrip/Debt Service/Deposit) 

Question. …….. trade is another export strategy whereby payments for the import of various materials and other inputs are made through the export of domestic manufactured goods to other country. (mutual/counter/direct) 

Question. The payments for imports against foreign currency loans extended by foreign governments/FIIs are made by ………Payment Method (Direct/Indirect/Reverse) 

Question. Adam Smith favoured free trade which is the result of advantages of division of labour and ____________________ both at the national and international levels. (distribution/specialization/supply) 

Question. Adam Smith, advocated the principle of __________________ advantage as the basis of international trade. (absolute/comparative/reciprocal demand) absolute

Question. In H-O theory, two-by-two-by-two model implies ______________, two commodities and two factors of production. (two prices/two markets/two countries) 

Question. The H-O theory explains richness in factor endowment in terms of __________________. (factor prices/transportation cause/demand) 

Question. J.S.Mill analysed the gains from trade in terms of his theory of _________________.(reciprocal demand/absolute advantage/comparative advantage) 

Question. The total gains from trade is the sum of the consumption and _______________ gains.(price/income/production) 

Question. During the second plan, there are about …………… import commodities completely substituted by domestic production. (400/500/300) 

Question. ………….. promotion is an instrument to earn more foreign exchange to bridge the BoP gap. (export/import/commodity) 

Question. The import substitution aims at ……….. foreign exchange. (spending/distributing/saving) 

Question. Gains from trade are divided into static and _________.(absolute/dynamic/comparative) 

Question. The ratio of an index of a country’s export prices to an index of its imports prices is called _________________________. (gains from trade/balance of payments/terms of trade) 

Question. The terms of trade determine how the gains from trade are allocated among the _________________.( trading countries/less developed countries/developed countries)

Question. Gains from trade refers to net benefits or increase in goods a country obtains by _____________ with other countries.(contributing/trading/dividing) 

Question. In the contemporary world, the concept of net barter terms of trade was introduced by ______________.(Adam Smith/F.W.Taussig/J.S.Mill) 

Question. The more inelastic the offer curves of a country, the more ______________ will be its terms of trade in relation to another country. (unfavourable/favourable/equal) 

Question. A diagrammatic explanation of Mill’s theory of reciprocal demand is given in terms of Marshall’s _______________ . (indifference curve/ offer curve/transformation curve) 

Question. The effects of devaluation on the balance of payments of a devaluating country depends on price elasticities of …………….. and supplyin export and import market. (income/demand/utility) 

Question. Favourable trade means exports are …….thanimports. (less/reduced/more) 

Question. If the elasticity of demand for imports is greater than unity, the effect of devaluation on the balance of payments will be ……. (favourable/decreasing/unfavourable) 

Question. A country gains the most from trade whose demand for foreign goods is highly ______________. (fluctuating/inelastic/elastic) 

Question. The concept of _________________ terms of trade is an improvement upon the net barter terms of trade. (utility/real cost/income) 

Question. The net barter terms of trade or commodity terms of trade is the ratio of ______________ prices to import prices. (export/commodity/equilibrium) 

Question. A tariff is synonymous with import duties or __________________. (import licensing/ custom duties/import quotas) 

Question. On the basis of purpose, tariffs are used for two different purposes, namely, revenue and ___________________.(development/diversification/protection) 

Question. When a tariff is imposed for importing one commodity by a small country, it does not affect the domestic economy and the world ________ of the country.(price/supply/demand) 

Question. The various effects of a tariff under partial equilibrium analysis are the result of the ___________ effect.(revenue/price/balance of payments) 

Question. The Ricardian theory of comparative advantage is based on the assumption that all units of _________ are homogeneous. (capital/labour/land) 

Question. A country will ___________ those commodities which its comparative advantage is the greatest. (export/import/buy) 

Question. Under comparative advantage theory, factors of production are perfectly mobile within each country but perfectly__________ between countries. (employed/immobile/homogeneous) 

Question. The redistributive effect of a tariff is a surplus over production costs and economic rent which goes to the domestic __________________ of the commodity.(consumer/price/producers) 

Question. An import quota like a tariff causes a _________________ in imports, rise in prices and increase in domestic production of the commodity on which it is imposed.(reduction/increase/equality) 

Question. The terms of trade depend upon ________________. (reciprocal demand/ comparative advantage/absolute advantage) 

Question. Mill analysed the gains as well as _________________________ of gains from international trade in terms of his theory of reciprocal demand. (differences/distribution/addition) 

Question. The optimum level of tariff is determined at the point where the trade indifference curve of a tariff imposing country is tangent to the ______________curve of the other country. (elasticity/demand/offer) 

Question. The income effect of a tariff refers to the effect of a tariff on the levels of income and _____________of the tariff imposing country. (price/employment/production) 

Question. Under _____________ quota, the full amount of the quota may be imported from any country. (allocated/bilateral/global) 

Question. Every country cannot produce all the commodities due to geographical and _________ conditions. (gains/climatic/tariff) 

Question. Laissez-faire means _______________. (free trade or no government intervention/protection/quotas) 

Question. In Haberler’s theory, the exchange ratio between the two commodities is expressed in terms of their ___________ costs. (oppourtunity/absolute/comparative) 

Question. It was ____________ who analysed the various effects of import quotas. (Samuelson/Kindleberger/Ricardo)

Question. One of the objectives of fixing import quotas is to restrict _____________. (exports/imports/production) 

Question. The actual gain from international trade is the difference in ________________ of two commodities in the two trading countries.(cost ratios/commodity ratios/price ratios) 

Question. Favourable terms of trade means exports are ______________ than imports.(more/less/neutral) 

Question. Barter terms of trade is also known as ____________ terms of trade.(income/commodity/utility) 

Question. When imposition of tariff decreases the volume of trade resulting in the reduction of welfare, it is known as the ____________effect of a tariff. (negative/positive/neutral) 

Question. Reduction in the growth of money supply tends to reduce ………….aggregate (supply/consumption/demand)

Question. Capital Account Convertibility (CAC) is the freedom to convert local financial assets into …….financial assets at market determined exchange rates. (regional/foreign/internal) 

Question. A committee on capital account convertibility was setup by the Reserve Bank of India (RBI) under the chairmanship of former RBI deputy governor ………… .(S.S.Tarapore/C.Rangarajan/T.N.Srinivasan) 

Question. Import quotas aim at restricting and _____________ imports to protect domestic industries from foreign competition. (developing/increasing/regulating) 

Question. Import quotas are also used as a _____________ device. (retaliatory/favourable/trading) 

Question. The term referred to a policy where domestic industries are protected from foreign competition is ___________. (free trade/laissez faire/protection). 

Question. With imposition of import quotas an increase in the domestic price of the commodity resulting in a reduction of domestic consumption of the given commodity is known as the __________effect. (protective/consumption/production)

Question. The two types of transactions in capital account are private and …….. (government/foreign/public)

Question. The difference between the value of goods and services exported and imported is called balance of……….(payments/trade/price) 

Question. If autonomous debit payments exceed autonomous credit receipts, it means a …….. balance of payments. (surplus/deficit/equal) 

Question. In the ratio PC/PL, P implies price, while C & L indicates, _____________ and _____________. (capital and labour/ cost and labour/capital and land) 

Question. The production possibility curve under increasing opportunity costs is _________________ to the origin. (concave/convex/parallel) 

Question. __________________________ advocated the policy of laissez-faire. (Adam Smith/Ricardo/Robbins) 

Question. Disequilibrium in balance of payments is automatically solved by forces of demand and……. for foreign exchange. (supply/revenue/cost) 

Question. If a country lowers the prices of its exports,it means imports will ……….. (Fluctuate/increase/decrease)

Question. According to David Ricardo, it is not absolute advantage but __________________ differences in costs that determine trade between two countries. (comparative/mobility/transportation) 

Question. The opportunity costs theory was propounded by_______________. (Haberler/J.S.Mill/Jacob Viner) 

Question. Under the opportunity costs theory, there is perfect competition in both the factor and __________ markets. (labour/commodity/capital) 

Question. The reduction in the external value of a currency in terms of other currencies iscalled……….(devaluation/evaluation/deficit) 

Question. An expansionary monetary policy leads to a BOP ………. (surplus/deficit/irregularity) 

Question. The _____________ economists were in favour of free trade policy. (modern/classical/political) 

Question. Import duties can be levied for revenue and not for protection under ___________. (import/export/free trade) 

Question. The policy of free trade means international trade without any ______________ on the movement of goods between countries. (development/restrictions/distributions) 

Question. In the balance of payments account, errors and omissions are recorded in the ……….column (regulated/credits/debits)

Question. The maturity period for short-term international capital transactions are ranging between…………….(3 months-less than 1 year/1year or more/1year) 

Question. Balance of Payments indicates the changing international economic or …… position of a country. (non-economic/industrial/financial) 

Question. Mere increase in the value of imports and exports is not an indicator of the level of ………………development (agriculture/economic/political) 

Question. Balance of Payments deficit can be bridged by strict fiscal and …………… discipline. (political/ monetary/industrial) 

Question. In order to control credit flows, the government of India had been using both …..and qualitative measures of credit control. (quantitative/regular/administrative) 

Question. Haberler calls the bilateral quota as ________ quotas. (mixing/agreed/tariff) 

Question. The balance of payments account of a country is constructed on the principle of ……………. (double-entrybook-keeping/balanceof payments/credit transaction) 

Question. If export of goods and services exceed imports of goods and services, the balance of payments is said to be ………………. (unfavourable/exceeding/favourable) 

Question. Until the end of 1970s, …….were regarded as a source of foreign exchange rather as an efficient means of allocating resources. (imports/production/exports) 

Question. India is the ………..largest exporter of services in the world in 2006-07. (3rd/10th/5th) 

Question. The sum of current account and capital account is known as …………..balance(basic/equal/liquidity) 

Question. The net value of the balances of short-term and long-term direct and portfolio investments is the balance on………….account.(current/capital/official settlements) 

Question. The high growth in imports in the post-liberalization era has been partly the result of increasing import intensity of………….. goods(capital /labour/equipment) 

Question. Payments of investment income in the form of higher dividends, profits and royalty to foreigners are a component of …….. payments. (visible/priority/invisible) 

Question. After the current account convertibility of rupees was introduced in 1994, there are no exchange restrictions on ………… account.(capital/current/saving) 

Question. In BoP, exports are shown as ……. Item. (positive/negative/same) 

Question. Balance of payments is made to balancethroughthe………account.(official/capital/current) 

Question. There will be loss instead of gain from devaluation when the demand for imports is perfectly…….. (elastic/mobile/inelastic)