Q.1 What is globalization in economic terms?
The process of a country isolating its economy
The integration of markets, trade, and investment across countries
A government policy to restrict imports
The establishment of local-only businesses
Explanation - Globalization refers to the increasing interconnectedness of economies through trade, investment, and information flow across countries.
Correct answer is: The integration of markets, trade, and investment across countries
Q.2 Which organization primarily promotes free trade among member countries?
World Trade Organization (WTO)
International Monetary Fund (IMF)
World Bank
United Nations
Explanation - The WTO aims to facilitate free trade, resolve trade disputes, and reduce barriers among member countries.
Correct answer is: World Trade Organization (WTO)
Q.3 Which of the following is a direct effect of international trade?
Reduced cultural exchange
Increased domestic monopolies
Access to a wider variety of goods and services
Decreased global investments
Explanation - International trade allows countries to import products they do not produce domestically, increasing consumer choices.
Correct answer is: Access to a wider variety of goods and services
Q.4 What is a tariff?
A tax on imported goods
A subsidy for local businesses
An international loan
A free trade agreement
Explanation - Tariffs are taxes imposed by governments on imported goods to protect domestic industries or raise revenue.
Correct answer is: A tax on imported goods
Q.5 Which of the following is a benefit of globalization?
Reduction in competition
Increased access to foreign markets
Decreased technological transfer
Isolation of economies
Explanation - Globalization opens markets to international businesses, increasing trade and opportunities for exporters.
Correct answer is: Increased access to foreign markets
Q.6 Which is a potential negative effect of globalization?
Job losses in some domestic industries
Higher domestic competition
Better access to technology
More foreign investments
Explanation - Globalization can lead to outsourcing and competition from cheaper imports, causing job losses in certain industries.
Correct answer is: Job losses in some domestic industries
Q.7 What does 'comparative advantage' mean in trade?
Producing all goods more efficiently than other countries
Producing goods at a lower opportunity cost than other countries
Trading goods without any cost
Avoiding international trade
Explanation - Comparative advantage occurs when a country can produce a good at a lower opportunity cost than others, which is the basis for mutually beneficial trade.
Correct answer is: Producing goods at a lower opportunity cost than other countries
Q.8 Which trade barrier involves limiting the quantity of goods imported?
Quota
Tariff
Subsidy
Export incentive
Explanation - A quota sets a maximum limit on the quantity of a product that can be imported, protecting domestic industries from excessive foreign competition.
Correct answer is: Quota
Q.9 Foreign Direct Investment (FDI) refers to:
A government grant to local businesses
Investment by a company from one country into business operations in another country
Importing goods from abroad
A short-term loan from the IMF
Explanation - FDI involves long-term investments by foreign companies in another country's economy, often through setting up factories or acquiring local firms.
Correct answer is: Investment by a company from one country into business operations in another country
Q.10 Which of these is an example of a free trade agreement?
NAFTA
WTO
IMF
World Bank
Explanation - NAFTA (North American Free Trade Agreement) reduced trade barriers among the US, Canada, and Mexico, promoting free trade.
Correct answer is: NAFTA
Q.11 Which factor is most responsible for accelerating globalization?
Technological advancements in communication and transportation
Increased isolationist policies
Local-only production methods
Decline in international investment
Explanation - Better technology allows faster trade, easier communication, and efficient transportation, accelerating global interconnectedness.
Correct answer is: Technological advancements in communication and transportation
Q.12 What is the role of the International Monetary Fund (IMF) in international trade?
Providing financial stability and temporary loans to member countries
Setting global tariff rates
Directly managing trade agreements
Producing goods for export
Explanation - The IMF supports countries facing balance-of-payments problems and promotes global financial stability, indirectly affecting trade.
Correct answer is: Providing financial stability and temporary loans to member countries
Q.13 Which of the following best describes outsourcing?
Hiring foreign suppliers to perform certain business functions
Buying domestic goods for local consumption
Restricting imports
Reducing foreign investments
Explanation - Outsourcing allows companies to reduce costs and focus on core activities by contracting tasks to external providers, often internationally.
Correct answer is: Hiring foreign suppliers to perform certain business functions
Q.14 What is meant by 'trade deficit'?
A country exports more than it imports
A country imports more than it exports
No trade occurs between countries
Exports and imports are equal
Explanation - A trade deficit occurs when a country's imports exceed its exports, leading to net outflow of domestic currency.
Correct answer is: A country imports more than it exports
Q.15 Which term describes a global reduction in tariffs and trade barriers?
Trade liberalization
Protectionism
Outsourcing
Import substitution
Explanation - Trade liberalization involves reducing tariffs, quotas, and regulations to encourage free trade between countries.
Correct answer is: Trade liberalization
Q.16 Which is a positive social effect of globalization?
Spread of cultural ideas and knowledge
Loss of local industries
Increased income inequality
Environmental degradation
Explanation - Globalization enables the exchange of culture, education, and knowledge across borders, enhancing global understanding.
Correct answer is: Spread of cultural ideas and knowledge
Q.17 Which of the following is an example of a protectionist measure?
Imposing high tariffs on imported steel
Signing a free trade agreement
Encouraging FDI
Reducing export restrictions
Explanation - Protectionism involves policies like tariffs, quotas, or subsidies to shield domestic industries from foreign competition.
Correct answer is: Imposing high tariffs on imported steel
Q.18 Which sector often benefits the most from globalization?
Export-oriented industries
Domestic-only agriculture
Local handicrafts
Non-tradable services
Explanation - Industries that produce goods for international markets benefit from access to larger consumer bases and trade opportunities.
Correct answer is: Export-oriented industries
Q.19 What is a multinational corporation (MNC)?
A company operating in multiple countries
A small domestic business
A government trade agency
A non-profit organization
Explanation - MNCs have production, sales, or operations in more than one country, often driving globalization through investment and trade.
Correct answer is: A company operating in multiple countries
Q.20 Which of the following is an example of a non-tariff barrier?
Import licensing requirements
Customs duty
Export subsidy
Free trade zone
Explanation - Non-tariff barriers include regulations or standards that restrict imports without using taxes, such as licenses or quotas.
Correct answer is: Import licensing requirements
Q.21 What is the purpose of a trade bloc?
To reduce trade barriers among member countries
To restrict imports from all countries
To impose uniform tariffs globally
To discourage foreign investment
Explanation - Trade blocs are groups of countries that cooperate to lower tariffs and promote easier trade among themselves.
Correct answer is: To reduce trade barriers among member countries
Q.22 Which of the following best illustrates offshoring?
A US company relocating its manufacturing to India
Importing finished goods from another country
Exporting local products to a foreign market
Reducing domestic production
Explanation - Offshoring involves moving business processes or production to another country, often to reduce costs.
Correct answer is: A US company relocating its manufacturing to India
Q.23 Which concept explains why countries trade even if one can produce all goods more efficiently?
Comparative advantage
Absolute advantage
Protectionism
Outsourcing
Explanation - Trade occurs based on comparative advantage, where countries specialize in goods with the lowest opportunity cost, benefiting all parties.
Correct answer is: Comparative advantage
Q.24 Which of these is considered a driver of international trade?
Differences in resource endowments
Identical production costs across countries
Isolationist policies
Local-only consumption patterns
Explanation - Countries trade because they have different resources and can produce some goods more efficiently than others, leading to specialization.
Correct answer is: Differences in resource endowments