9

CHAPTER

Worksheet
1. Which one is not a benefit of international 6. Which one of the following is the first theory of
Trade? International Trade that emerged in England
Efficient deployment of productive in the 16th Century?
resources. Mercantilism
Access to New Markets & New Materials.
Absolute Cost Advantage Theory
Increased use of Automation, Technology
& Innovation. Comparative. Cost Advantage Theory
Economic exploitation from growing Product Life-Cycle Theory
political power
7. Given the number of labour hours to produce
2. “Massive & Aggressive export over import to cloth and grain in two countries, which country
Accumulate wealth & favourable BOP is should produce grain?
Reason of International trade. "This is _________ Labour Cost (hours) for production of one unit
The Mercantilists' View Theory
Country A Country B
The Theory of Absolute Advantage
Cloth 40 80
The Heckscher - Ohlin Theory
New International Trade Theory Grain 80 40
Country A
3. Ability of a party to produce greater quantity
of Goods/Services than competitors using Country B
same of resources.________ is called. Neither A nor B
Absolute Advantage Both A and B
Absolute disadvantage
Comparative Advantage 8. Who propounded the theory that a country
should specialize in the production of goods
Comparative disadvantage
for which it has an absolute cost advantage and
then trade these goods for goods produced by
4. Which of the following is NOT the benefit of
another country?
International Trade?
Adam Smith
It is powerful stimulus to economic
efficiency and contributes to economic David Ricardo
growth.
Heckscher and Ohlin
Efficient deployment of productive
resources to their best use. Krugman
Economic exploitation of under privileged 9. Comparative advantage refers to:
countries.
Opening up of new markets results in a counrty's ability to produce some good
broadening the production base. or service at the lowest possible cost
compared to other countries
5. Which of the following holds that a country can a country's ability to produce some good
increase its wealth by encouraging exports and or service at a lower opportunity cost than
discouraging imports? other countries.
Capitalism Choosing a productive method which uses
Socialism minimum of the abundant factor
Mercantilism (a)and(b)above
Laissez faire

1
10. “Even if one nation is less efficient than the 16. As per The Heckscher - Ohlin Theory
other in production of all goods, still scope for _______________ the commodity Whose
mutually beneficial international trade.” This production Use Intensively the Factors Which
are relatively Abundant.
is ________________
Import
The Theory of comparative Advantage.
Export
The Theory of Absolute Advantage
Neutral
The Heckscher - Ohlin Theory
None of these
New International Trade Theory
17. “It is the way one person's value for goods or
11. As Per comparative Advantage Theory________ service affected by value of goods & services to
the commodity _________ opportunity cost. others." it is Called ____________
Import, Less Network effect
Export, less Bandwagon effect
Export, High Both(a)&(b)
None of these Economies of scale.
12. Which theory of international trade identified 18. Firm Produce More When its cost per unit
the role of labour and capital, so-called factor going down. So reap the benefits of large scale
endowments, as a determinant of advantage? & More profits; firms Serve domestic as well as
Theory, of Absolute Advantage Foreign market. It is called____________.
Theory of Comparative Advantage Network effect
Heckscher-Ohlin theory of trade Bandwagon effect
None of these Both(a)&(b)
Economies of scale.
13. The theory given by Swedish economists "Eli
Heckscher and Bertil Ohlin" is also known as: 19. Which of the following holds that a country can
The Heckscher - Ohlin theory of trade increase its wealth by encouraging exports and
discouraging Imports.
Factor Endowment theory of trade
Capitalism
Modern theory of trade
Socialism
All of the above
Mercantilism
14. Who has propounded "New Trade Theory" in
Laissez faire
the 1970's?
Paul Krugman 20 Match the column______________
Norman A) Absolute Advantage i) David Ricardo
Dixit B) comparative Advantage ii) Heksher-ohlin
All of the above C) factor-endowment iii) Paul Krugman
D) New international Trade iv) Adam smith
15. Comparative cost Theory is ____________in
Nature based on ______________. (A-i) (B-ii) (C-iii) (D-iv)
Positive, money cost. (A-iv) (B-iii) (C-ii) (D-i)
Positive, Labour cost (A-ii) (B-iv) (C-i) (D-iii)
Normative, money cost (A-iv) (B-i) (c-ii) (D-iii)
Normative, Labour cost

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21. What does the principle of Absolute Advantage 26. The tariff rate is ₹ 500 per tonne plus 10 per
refer to ? cent of the value of the product imported.
The ability to produce a greater quantity This type of tariff is termed as ___________.
of a goods using fewer resources Fixed Rate Duty
The ability to produce a greater quantity Variable Rate Duty
of a goods using the same amount of
Ad valorem Duty
resources as competitors
Compound Duty
The ability to produce a lesser quantity of
a goods using the same amount of 27. Tariff which is charge as specific or ad valorem
resources as competitors which ever is higher Basis is called_

The ability to produce a greater variety of Mixed Tariff

goods than competitors Fixed Duty
Technical Tariff
22. Protectionism is a State policy aimed to protect
domestic producers against Foreign A Compound Duty
Competition through the use of_______
instruments. 28. The Highest Tariff charged among WTO
members is Called ____________
Tariffs
MNF Tariff
Quotas
NTC Tariff
Non-tariff trade policy
WTO Tariff
All of the above
MFN Tariff
23. ___________ refers to opening up of domestic
markets to goods and services from the rest of 29. Duty on specific content i.e. on component or
the world by bringing down trade barriers. related items is ____________
Trade liberalization Specific tariff
Trade Globalisation Technical Tariff
Trade Privatisation Mixed tariff
LPG Non-Technical Tariff

24. When a specified amount of tariff is charged 30. A WTO Member binds itself with legal
per unit of the product (e.g., 1000 per tonne of commitment not to raise tariff above a certain
cement), then it is categorized as _____________ level.
Specific Duty MFN Tariff

Ad valorem Duty Applied Tariff

A Compound Duty NTP Tariff

Value Duty Bound Tariff

25. Tariff levied as a percentage of value of 31. Duty that actually charged on MFN basis. It can
product is termed as ____________ differ from bound tariff but not higher than
bound tariff,
Specific Duty
MFN Tariff
Fixed Duty
Applied Tariff
Ad valorem Duty
NTP Tariff
A Compound Duty
Bound Tariff

3
32. A Duty fixed to bring the price of an imported 38. What are the effect of Tariff. ______________
good up to level of domestic support price.
Tariff barriers create obstacles to trade,
Bound Tariff decrease the volume of imports and
Variable Tariff exports
MFN Tariff Domestic consumers suffer a loss in
consumer surplus
fixed Tariff
Producers in the importing country
33. Tariff one that is set so high that no imports experience an increase in well-being
can enter. All of these.
Bound Tariff
39. Measures refer to Product specific properties
Fixed Tariff
such as characteristics of product technical &
Prohibitive Tariff specifications production processes.
Variable Tariff Technical measures
34. Negative import tariff which is payment per Non-Technical measures
unit or as a % of value for imported good, Tariff measures
called
None of these
Export subsidy
Import subsidy 40. Measures related to trade requirements such
Non-Tariff as-
None of these Shipping requirements, custom formalities
trade rules, Taxation policies etc.
35. when manufacturers sell goods in a foreign Technical measures
country below the sales prices in their
domestic market or below their full average Non-Technical measures
cost of the product, is called ____________ Tariff measures
Export subsidy None of these
Import Subsidy
Dumping 41. Hard measures includes ____________
counter-effect measures on Price & Quantity of goods
Antidumping measures
36. __________ may be initiated as a safeguard
instrument by imposing additional import Financial measures
duties/tariffs so as to offset the foreign firm's Administrative measures
unfair price advantage, of Dumping.
countervailing Duty 42. Measures are applied to protect human, animal
or plant life from risks arising from additives,
Anti subsidy Duty pests, contaminants, toxins or disease-causing
Anti dumping Duty organisms and to protect biodiversity.
Anti Export Duty TBT measures
37. which duty Aim to offset the artificially low SPS measures
prices charged by exporters who enjoy export NTP measures
subsidies and tax concessions offered by the
governments in their home country. MFN measures

countervailing Duty 43. Which cover both food and non-food traded
Anti subsidy Duty products refer to mandatory 'Standards and
Technical Regulations' that define the specific
Antidumping Duty characteristics that a product should have,
Anti Export Duty. such as its size, shape, design, labelling /
marking/packaging, functionality or

4
 performance and production methods, 48. Producers may be restricted from providing
excluding measures covered by the SPS after-sales services for exported goods in the
Agreement. importing country.
TBT measures Post sale service measures
SPS measures Investment measures
NTP measures Financial measures
MFN measures Administrative measures

44. It includes measures such as advance payment 49. The criteria needed by governments of
requirements and foreign exchange controls importing countries to determine the national
denying the use of foreign exchange for certain source of a product.
types of imports or for goods imported from
Safeguard measures
certain countries.
Investment measures
Post sale service measures
Embargo
Investment measures
Rules of origin
Financial measures
Administrative measures 50. These are initiated by countries to restrict
imports of a product temporarily if its
45. These measures are aimed at granting domestic industry is injured or threatened
exclusive or special preferences or privileges with serious injury caused by a surge in
to one or a few limited group of economic imports.
operators.
Safeguard measures
Post sale service measures
Investment measures
Investment measures
Embargo
measure affecting competition
Rules of origin
Rules of origin
51. A total ban imposed by government on import
46. These measures include rules on local content or export of some or all commodities to
requirements that mandate a specified fraction particular country or regions for a specified or
of a final good should be produced indefinite period.
domestically.
Safeguard measures
Post sale service measures
None of these
Investment measures
Embargo
Financial measures
Rules of origin
Administrative measures
52. A type of informal quota administered by an
47. Limitations imposed on the distribution of exporting country voluntarily restraining the
goods in the importing country involving quantity of goods that can be exported out of
additional license or certification that country during a specified period of time
requirements. is called.
Post sale service measures Safeguard measures
Investment measures VER measure
Financial measures Embargo
Distribution Restriction Rules of origin

5
53. Which of the following is not a negative 59. It has a group of countries that have a free
outcome of tariff? trade agreement between themselves and may
apply a common external tariff to other
Decreases revenue to the government
countries.
Producers of the importing country
increases the well being Trading bloc
Domestic consumers suffer a loss in Trade Agreement
consumer surplus Common market
By ignoring comparative advantage,
monetary union
tariffs discourage efficient production in
the rest of the world 60. It is a group of countries that eliminate all tariff
and quota barriers on trade with the objective
54. It is a process in which nations meet together
of increasing exchange of goods with each
to discuss possibility of trade with the goal of
other..
reaching at Trade agreement
Free Trade
Trading bloc
Trade Negotiation Prefrential Trade
Trade Liberalization common market
Trade Restriction monetary Union

55 As of 1 February 2021, How many RTAs were 61. The members share a common currency, is
in force? called ___________
339 Free Trade
393 Prefrential Trade
399 Common market
939 monetary Union
56. Agreements under which an importing 62. It is a group of countries that eliminate all
country offers trade incentives in order to tariffs on trade among themselves but
encourage the exporting country, that will maintain a common external tariff on trade
improve the exporting country's economy. with countries outside the union
Multilateral agreement Economic Union
Bilateral agreement
Custom Union
Unilateral agreement
Common market
None of these
monetary Union
57. Agreements that set rules of trade between
two countries, two blocs or a bloc and a 63. Providing for the free flow of output and of
country. These may be limited to certain factors of production (labour, capital and other
good/services or certain types of market. productive resources) by reducing or
eliminating internal tariffs on goods and by
Multilateral agreement creating a common set of external tariffs, is.
Bilateral agreement _____________
Unilateral agreement Economic Union
None of these Custom Union
58. WTO is a _____________ Common market
Multilateral agreement monetary Union
Bilateral agreement
Unilateral agreement
None of these

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64. THE GENERAL AGREEMENT ON TARIFFS 70. WTO is a _______________ tier system of Decision
ANDTRADE established on ___ making
1978 one
1948 Two
1995 Three
1938 four

65. THE GENERAL AGREEMENT ON TARIFFS 71. Which of the following is/are responsible for
ANDTRADE has ____________ overseeing the implementation of the WTO
agreements?
Good Council
Ministerial Conference
service council
General Council
IPR council
Goods Council, Services Council and
All of these
Intellectual Property Council
66. World Trade Organisation (WTO) was set up All of the above
on _________ replacing the General Agreement
on Tariffs and Trade. 72. The WTO accounts for about __________ of world
trade.
1st January, 1990
50%
1st January, 1995
70%
1st January, 1993
85%
None of these
95%
67. Which of the following culminated in the
establishment of the World Trade Organization? 73. The WTO's top-level decision-making body is
the _________ which can take decisions an all
The Doha Round
matters under any of the multilateral trade
The Tokyo Round agreements.
The Uruguay Round Ministerial conference
The Kennedy Round General council

68. The headquarters of WTO is in ____________ Goods council

USA Services council and intellectual property

council
Switzerland
Australia 74. Which of the following meets several times a
year at the Geneva headquarters?
Germany
Ministerial Conference
69. The only global international organization
dealing with the rules of trade between General Council
nations. The principal objective of the WTO is Goods Council
to facilitate the flow of international trade
Services Council
smoothly, freely, fairly, and predictably..
Following is/are the objectives of WTO ________
75. WTO has _____________ members, among them
To set and enforce rules for international ___________are developing countries.
trade,
117, 164
To resolve trade disputes,
164, 117
To help developing countries benefit fully
146, 117
from the global trading system.
164, 171
All of these

7
76. WTO Principles are _________ 81. Promoting fair competition is principle of _____
Trade without discrimination, Promoting Treating other people equally
fair competition, Predictability Lowering trade barriers
Freer trade, economic reform, Countries "bind" their commitments.
transparency Open, fair, and undistorted competition.
Predictability, Trade without discrimi-
nation, transparency 82. The Agreement on Agriculture includes
explicit and binding commitments made by
All of these. WTO Member governments
77. Treating other people equally Under the WTO on increasing agricultural productivity
agreements, countries cannot normally and rural development.
discriminate between their trading partners, is market access and agricultural credit
__________ support.
MFN principle market access, domestic support and
export subsidies.
NTP Principle
market access, import subsidies and
Free Trade principle export subsidies.
Predictability Principle
83. TPRM Stands for _____________
78. Treating foreigners and locals equally Trade Policy Review Mechanism
imported and locally- produced goods should
Trade Practices Regulatory Measures
be treated equally at least after the foreign
goods have entered the market, is ________ . Transparent Practices Regulatory
Mechanism
MFN principle
None of these
NTP Principle
Free Trade principle 84. The most controversial topic in the yet to
conclude Doha Agenda is
Predictability Principle
trade in manufactured goods.
79. The WTO system contributes to development. trade in intellectual property rights-based
Over three-quarters of WTO members are goods.
developing countries and countries in
trade in agricultural goods.
transition to market economies, economies is
the ______. market access to goods from developed
countries.
MFN principle
NTP Principle 85. Which of the following is NOT a member of
G20?
Free Trade principle
Italy
Economic reform Principle Japan
80. Predictability through binding and Australia
transparency is Principle of ___________. Pakistan
Treating other people equally 86. What does TRIPS stand for?
Lowering trade barriers Trade-Related Agreements on Investment
Countries "bind" their commitments. Policies
Open, fair, and undistorted competition. Trade-Related Aspects of Intellectual
Property Rights
Transnational Regulations for
International Product Standards
Trade Regulations for International
Patent Systems

8
87. The North American Free Trade Agreement 93. What is the name of the system in which
(NAFTA), is a trade agreement signed Foreign exchange rate is determined by
between: market forces and central bank influences the
exchange rate through intervention in the
United States of America and Canada
Foreign exchange market?
United States of America, Canada, and
Mexico Fixed Exchange Rate System
United States of America and Mexico Managed Floating Rate System
Canada and Mexico Floating Exchange Rate System
88. GATT was established in the year Managed Fixed Rate System
1945 94. If Foreign Exchange Rate expressed as 1$ = ₹
1948 82, it is called_______________.
1995 Direct Quote
2014
Indirect Quote
89. Under WTO agreements, the countries cannot Inverse Quote
normally discriminate between their trading
None of these
partners. This is referred to as ___________
National Treatment (NT) 95. __________________refers to the market in which
Most Favoured Nation (MFN) sale and purchase of Foreign currency is
settled on a specified future date at a rate
Promoting Fair Competition (PFC)
agreed upon today.
Free Trade through negotiation (FTN)
Spot Market
90. Which term is used to a system in which Forward Market
exchange rate is determined by forces of
demand and supply of different currencies in Direct Market
the Foreign exchange market? Indirect Market
Fixed Exchange Rate System
96. _______________refers to the market in which the
Floating Exchange Rate System receipts and payments are made immediately.
Managed floating Rate System Spot Market
Pegged Exchange Rate System Forward Market
Future Market
91. Which of the following is a merit of flexible
Spontaneous Market
Exchange Rate System?
Maintains Equilibrium level 97. If the forward exchange rate is quoted at more
than a spot exchange rate, then there is a
No need for huge Foreign Exchange
__________
reserves
forward premium
Optimum Utilisation of resources
forward discount
All of the above
Spot Premium
92. Which of the following is NOT the feature of Spot discount
Flexible Exchange Rate System?
98. It is a measure of the value of a domestic
Exchange rate is fixed officially by the currency against a weighted average of various
Government. foreign currencies.
The exchange rate keeps on changing.
REER
Foreign Exchange Reserves are not
NEER
required to be kept.
NER
Flexible exchange rate may lead to
depreciation or appreciation. RER

9
99. Identify the correct formula _______________ 104. IF REER Increase, Export becomes_____________
Foreign Price Index & As a Result ____________
NEER = REER ×
Domestic Price Index
costlier & Reduced
Foreign Price Index
REER = NEER × Domestic Price Index costlier & Increased
Domestic Price Index cheaper & Increased
REER = NEER ×
Foreign Price Index
Domestic Price Index
cheaper & Reduced
NEER = REER ×
Foreign Price Index
105. Due to Home currency depreciation country's
100. On the demand side, the participants operate export become ________________ & _____________
for ___________ costlier & Reduced
Purchase of goods and services from costlier & Increased
another country.
cheaper & Increased
To make investment income payment
aboard. cheaper & Reduced

To purchase financial assets aboard. 106. Currency Depreciation _______________Debt

Any of the above Burden & ______________ Profits.
Decreased , Rise
101. An increase in the supply of foreign exchange.
Decreased ,, Lower
shifts the supply curve to the right and as
a consequence, the exchange rate Increased , Rise
declines. Increased, Lower
shifts the supply curve to the right and as
a consequence, the exchange rate 107. If 1$ = ₹ 80 to increases, 1$= ₹ 83 It is said to
increases. be Home currency.

more units of domestic currency are Depreciation

required to buy a unit of foreign exchange. Appreciation
the domestic currency depreciates and Revaluation
the foreign currency appreciates.
None of these
102. It takes place when there is an increase in the
108. All else equal, which of the following is true if
home currency price of the foreign currency.
consumers of India develop taste for imported
The home currency thus becomes relatively
commodities and decide to buy more from the
less valuable.
US?
Depreciation
The demand curve for dollars shifts to the
Appreciation right and Indian Rupee appreciates
Revaluation The supply of US dollars shrinks and,
None of these therefore, import prices decrease
The demand curve for dollars shifts to the
103. _________is a deliberate downward adjustment right and Indian Rupee depreciates
in the value of a country's currency relative to
another country's currency or group of The demand curve for dollars shifts to the
currencies or standard. left and leads to an increase in exchange
rate
Devaluation
Revolution
Depreciation
None of these

10
109. Match the following by choosing the term 114.. Aid with strict rules for use of money is called.
which has the same meaning _____________
(i) floating exchange rate a. Devaluation Bilateral aid
(ii) depreciation b. fixed
exchange rate Tied Aid
(iii) pegged exchange rate c. flexible untied Aid
exchange rate
(iv) deliberate downward d. Export All of these
adjustment in the value Increase
of a country's currency 115. Which is / are an example of Borrowings
_________
(i-c) (ii-a) (iii-b) (iv-d)
Direct inter govt. loan
(i-c) (ii-d) (iii-b) (iv-a)
External commercial borrowings
(i-c) (ii-b) (iii-a) (iv-d)
Trade credit
(i-d) (ii-c) (iii-a) (iv-c)
All of these
110. What term is used for the rate between
currencies Y and Z, which is derived from the 116. FDI & FPI are kind of. ___________
given rates of another set of two pairs of foreign Aid
currency (say, X and Y, and, X and Z) ?
investments
Bid rate
Borrowings
Ask rate
All of these
Spot rate
Cross rate 117. FDI investor can be ______________
only individual
111. Suppose the exchange rate between INR and
private enterprises
EUR changes from 1 EUR = 80 INR to 1 EUR =
85 INR. What can be said about the change in Public enterprises
the value of the INR relative terms to the EUR? All of these
INR has appreciated against EUR.
118. When Audi investment in TATA Motors?
INR has depreciated against the EUR. It is type of_________________ investment.
EUR has no effect against INR. Horizontal investment
EUR has depreciated against INR. Vertical investment
conglomerate investment
112. Number of units of a foreign currency can be
exchanged for one unit of local currency is All of these
referred to as ___________
119. Mr. Zing Ping investment in India & Purchase
Direct Quote 21% of Equity in Aliance Industries. It is called
Indirect Quote type of ______________ .

European Currency FDI

FPI
Cross Quotes
ODI
113. which is / are included in Types of foreign Fil
capital?
foreign Aid 120. Which is Not a feature of FDI?

investments creation of physical Asset

Borrowings Long Term in Nature

All of these Accompained in Technology

speculative in Nature

11
121. What is / are Reasons of FDI? 126. Foreign corporations invest in India to benefit
from the country's particular investment
the increasing interdependence of
privileges such as tax breaks and
national economies and the consequent
comparatively lower salaries. This type of
trade relations and international
investment is an example of :
industrial cooperation established among
them Foreign Portfolio Investment
internationalisation of production and Joint Venture
investment of transnational corporations
Foreign Direct Investment
in their subsidiaries and affiliates.
Strategic Alliance
desire to reap economies of large-scale
operation arising from technological 127. What is the main difference between Foreign
growth Direct Investment (FDI) and Foreign Portfolio
All of these Investment (FPI)?
FDI creates physical assets, while FPI
122. What is/are Factors in the host country
involves only financial assets.
discouraging inflow of foreign investments
FDI involves financial assets, while FPI
infrastructure lags, creates physical assets.
political instability, Both FDI and FPI create physical assets.
language barriers, Both FDI and FPI involve only financial
assets.
All of these
128. Not a component of FDI according to IMF:
123. FDI Which makes use of the existing Infra by Equity capital
merging, acquiring, leasing instead of
developing a New one. is called ________ Reinvestment earnings
Green Field Investment Portfolio investments
Brown Field Investment Intra company loans
Yellow field investment 129. What is/are the Modes of FDI ?
Red field investment Opening of a subsidiary
124. Which one is Not a benefit of FDI? Joint venture
economic development Green field investment
fosters competition All of these
direct employment 130. Stake in a firm at below 10% of ordinary
regional disparity. shares is called _____________.
FDI
125. When investor makes a foreign investments in
a business that is unrelated to its existing ODI
business in its home country. The investment FPI
is called _______________
DII
Horizontal investment
Vertical investment
conglomerate investment
All of these

12
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

D A A C C A B A B A B C D A D B C D C D

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

B D A A C D A D B D B B C B C C A D A B

41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

A B A C C B D A D A C B B B A C B A A A

61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80

D B C B A B C B D C A D A B B D A B D C

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

D C A C D B B B B B D A B A B A A A C D

101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120

A A A A C D A C B D B B D B D B D A A D

121 122 123 124 125 126 127 128 129 130

D D B D C C A C D C

13