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- Questions and Answers on Finance of International Trade | L. Waxman | Springer
- International Trade Mock Test
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- Global Trade Policy: Questions and Answers
This set of 10 questions based on the World Trade Organisation. We have given explanation of the questions for the convenience of the students. During the 10th Ministerial Conference held on 17 Dec. Liberia rd and Afghanistan th. Which of the following institutions is not part of the World Bank community? World Bank group is comprised of the five institutions i. Explanation : There are some big economies of the world but they are not the member of the WTO.
Which of the following statements is not correct? International Investment not Promoted by Fixed Rates: The argument that long-term international investments are encouraged under fixed exchange rate system is not valid. Both the lenders and borrowers cannot expect the exchange rate to remain stable over a very long-period. The sterling block functioned smoothly during the thirties in spite of the fluctuating rates of the member countries. Speculation not Prevented by Fixed Rates: The main weakness of the stable exchange rate system is that in spite of the strict exchange control, currency speculation is encouraged.
This destroys the stability in the exchange value of the home currency and makes devaluation of the currency inevitable. For instance, the pound had to be devalued in mainly because of such speculation. Hence, the depreciation of the weak currency would simply tend to worsen the balance of payments deficit further.
Long-term foreign investments arc greatly reduced because of higher risks involved.
Fluctuating exchange rates cause changes in the price of imported and exported goods which, in turn, destabilise the economy of the country. By encouraging speculative activities, such a system causes large-scale capital outflows and inflows, thus, seriously disturbing the economy of the country.
In a situation of high liquidity preference, people tend to hoard currency, interest rates rise, investment falls and there is large-scale unemployment in the economy. Inflationary rise in prices leads to further depreciation of the external value of the currency. Such policies produce desirable effects on production and employment only when supply of factors of production is elastic.
Answer : Gains accrue to all the participating countries in international trade. As noted by Jacob Viner, the classical economists usually adopted the following alternative criteria of measuring the gain from trade accruing to an individual country:. In short, an index of cost reduction or improvement in the marginal physical product of labour can be used as a criterion for measuring the gain from international trade.
G stands for the gain; Ca stands for per unit cost of production after trade; Cb stands for per unit cost of production before trade. If G is negative, it suggests cost economy to that extent. MPPb refers to the marginal physical product of labour before trade. The positive magnitude of Gi thus, implies a gain to that extent.
A second criterion, the real income criterion follows from the first that to the extent the real income or the net national product of the country increases on account of international trade, may be regarded as the gain from international trade. Ya stands for the national income after trade.
Yb stands for the national income before trade. The last criterion, the terms of trade index, of measuring gain is, however, the most celebrated one.
Questions and Answers on Finance of International Trade | L. Waxman | Springer
Terms of trade refer to the ratio of export price Px to import price Pm of a country -. Answer : Terms of trade are influenced by a number of factors. Important among them are given below:. If the demand for a country's exports is less elastic as compared to her imports, the terms of trade will tend to be favourable because the exports can command higher price than imports.
On the other hand, if the demand for imports is less elastic than that for exports, the terms of trade will be unfavourable. If the supply of a country's exports is more elastic than the imports, the terms of trade will tend to be favourable. The net effect of economic development depends upon the extent of these two effects. Rate of Exchange: Changes in the rate of exchange of a country's currency also affect its terms of trade. If a country's currency appreciates, its terms of trade will improve because a rise in the value of the currency causes an increase in the export prices and decrease in the import prices.
These measures, if not retaliated by other countries, improve a country's terms of trade by restricting imports. As a result, the terms of trade will tend to be unfavourable in this case relative to the under populated or optimally populated country.
International Trade Mock Test
This is because the smaller country can reap the gains of economies of scale enjoyed by the larger one in the international trade. Answer : WTO's aim is to liberalise international trade. WTO establishes rules regarding international trade and sees that these rules are obeyed. It is seen that the developed countries have unfairly retained trade barriers.
On the other hand, WTO rules have forced developing countries to remove trade barriers. Answer : Important objectives of WTO are mentioned below:. On the other hand, the WTO is a new international organisation set up as a permanent body. It is designed to play the role of a watchdog in the spheres of trade in goods, trade in services, foreign investment, intellectual property rights, etc. Financial Management Tutorial.
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Business Skills. Digital Marketing Skills. Human Resources Skills. Health Care Skills. Finance Skills. All Courses. All Practice Tests. Forex Management Interview Questions Question 3.
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Forex Management Tutorial Question 5. Business Development Interview Questions Question 6. Buyers and sellers rarely meet one another and personal contact is rarely possible.
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There is a great time lag between placement of order and receipt of goods from foreign countries. Distance creates higher costs of transportation and greater risks. Price lists and catalogues are prepared in foreign languages.
Global Trade Policy: Questions and Answers
Advertisements and correspondence also are to be done in foreign languages. A trader wishing to buy or sell goods abroad must know the foreign language or employ somebody who knows that language. Goods have to be transported over long distances and they are exposed to perils of the sea.