Q.1 What does protectionism in international trade primarily aim to do?
Promote free trade
Protect domestic industries
Increase foreign imports
Reduce government control
Explanation - Protectionism refers to government policies that restrict imports to protect domestic industries from foreign competition.
Correct answer is: Protect domestic industries
Q.2 Which of the following is a common tool of protectionism?
Tariffs
Floating exchange rates
Free trade agreements
Foreign direct investment
Explanation - Tariffs are taxes imposed on imports to make them more expensive and protect local producers.
Correct answer is: Tariffs
Q.3 A quota in international trade refers to:
A tax on imports
A fixed limit on imports
Subsidy to exporters
A ban on exports
Explanation - A quota restricts the quantity of a specific good that can be imported into a country.
Correct answer is: A fixed limit on imports
Q.4 Which organization promotes free trade and discourages protectionism?
World Trade Organization
World Bank
International Monetary Fund
OPEC
Explanation - The WTO works to reduce trade barriers and promote free trade among member countries.
Correct answer is: World Trade Organization
Q.5 An export subsidy is:
A tax on exports
Government financial support to exporters
A limit on exported goods
A ban on imports
Explanation - Export subsidies make domestic goods cheaper in foreign markets, encouraging exports.
Correct answer is: Government financial support to exporters
Q.6 What is the 'infant industry argument' in support of protectionism?
Protecting mature industries
Supporting newly established industries until they become competitive
Restricting imports of food items
Encouraging foreign firms to invest
Explanation - The infant industry argument suggests that new industries need protection until they can compete globally.
Correct answer is: Supporting newly established industries until they become competitive
Q.7 Which of the following is NOT a protectionist measure?
Import tariff
Export quota
Free trade agreement
Import quota
Explanation - Free trade agreements reduce barriers, unlike protectionist policies which restrict trade.
Correct answer is: Free trade agreement
Q.8 What is a potential drawback of protectionism?
Encourages domestic production
Increases government revenue
Leads to trade wars
Protects jobs
Explanation - Protectionist measures can provoke retaliatory policies from other countries, leading to trade wars.
Correct answer is: Leads to trade wars
Q.9 A tariff is generally imposed to:
Reduce exports
Encourage imports
Protect domestic industries
Increase competition
Explanation - Tariffs make imported goods more expensive, helping domestic producers remain competitive.
Correct answer is: Protect domestic industries
Q.10 Which type of protectionism limits the amount of a good that can be imported?
Tariff
Quota
Export subsidy
Sanction
Explanation - Quotas restrict the maximum number or value of goods allowed into the country.
Correct answer is: Quota
Q.11 Non-tariff barriers include:
Import quotas
Tariffs
Export subsidies
Devaluation
Explanation - Non-tariff barriers include quotas, regulations, and standards that restrict imports without using tariffs.
Correct answer is: Import quotas
Q.12 The Smoot-Hawley Tariff Act (1930) is an example of:
Trade liberalization
Protectionism
Monetary policy
Exchange control
Explanation - The Smoot-Hawley Tariff Act imposed high tariffs on imports, worsening the Great Depression.
Correct answer is: Protectionism
Q.13 Which policy protects local farmers from foreign agricultural imports?
Agricultural subsidies
Free trade agreements
Foreign exchange controls
Globalization
Explanation - Subsidies to farmers help them compete with cheaper foreign agricultural imports.
Correct answer is: Agricultural subsidies
Q.14 Which of the following is an effect of tariffs on imports?
Lower prices for consumers
Higher government revenue
Increased foreign competition
Greater trade liberalization
Explanation - Tariffs generate income for the government while raising import prices.
Correct answer is: Higher government revenue
Q.15 Voluntary Export Restraints (VERs) are:
Export taxes
Agreements to limit exports voluntarily
Import quotas
Trade liberalization policies
Explanation - VERs are agreements between exporting and importing countries to limit the quantity of exports.
Correct answer is: Agreements to limit exports voluntarily
Q.16 Which of these is a justification for protectionist policies?
To lower domestic prices
To protect jobs
To increase imports
To encourage globalization
Explanation - Protectionism is often justified to safeguard employment in domestic industries.
Correct answer is: To protect jobs
Q.17 Which of these policies aims to protect national security interests?
Import quotas on essential goods
Export subsidies
Currency devaluation
Free trade
Explanation - Protectionism may be used to ensure essential industries like defense remain independent of imports.
Correct answer is: Import quotas on essential goods
Q.18 The term 'dumping' in trade refers to:
Selling goods abroad at below cost
Banning exports
Raising domestic prices
Imposing tariffs
Explanation - Dumping involves exporting goods at unfairly low prices to drive competitors out of business.
Correct answer is: Selling goods abroad at below cost
Q.19 Anti-dumping duties are imposed to:
Protect consumers
Counter unfair foreign pricing
Encourage dumping
Promote globalization
Explanation - Anti-dumping duties protect domestic producers from unfairly cheap imports.
Correct answer is: Counter unfair foreign pricing
Q.20 Which of the following can be a negative impact of protectionism?
Higher domestic employment
Greater product variety
Higher consumer prices
Improved trade balance
Explanation - Protectionist measures often raise import prices, which can increase costs for consumers.
Correct answer is: Higher consumer prices
Q.21 What is the main argument against protectionism?
It reduces government revenue
It restricts consumer choice and raises prices
It increases unemployment
It promotes innovation
Explanation - By limiting imports, protectionism reduces product variety and raises consumer costs.
Correct answer is: It restricts consumer choice and raises prices
Q.22 Strategic trade policy is:
A policy to encourage foreign investment
Government support for key industries to gain international advantage
A free trade agreement
A fixed exchange rate system
Explanation - Strategic trade policy argues that governments should support industries with high growth potential.
Correct answer is: Government support for key industries to gain international advantage
Q.23 Import substitution industrialization (ISI) refers to:
Encouraging domestic production instead of imports
Promoting free trade
Expanding exports
Attracting foreign capital
Explanation - ISI is a development strategy focused on producing goods domestically rather than importing them.
Correct answer is: Encouraging domestic production instead of imports
Q.24 Which of the following is a hidden form of protectionism?
Import tariffs
Quotas
Health and safety regulations
Export subsidies
Explanation - Strict domestic regulations may be used to limit imports under the guise of protecting consumers.
Correct answer is: Health and safety regulations
Q.25 One long-term risk of protectionism is:
Improved competitiveness
Economic inefficiency
Trade liberalization
More innovation
Explanation - Protectionism may reduce competition, leading to inefficiency and lack of innovation.
Correct answer is: Economic inefficiency