hitechpathshala

Q. 1

Which of the following statements is incorrect?

Direct investments are real investments in factories, assets, land, inventories etc. and involve foreign ownership of production facilities.

Foreign portfolio investments involve flow of ‘financial capital’.

Foreign direct investment (FDI) is not concerned with either manufacture of goods or with provision of services.

Portfolio capital moves to a recipient country which has revealed its potential for higher returns and profitability.

Q. 2

Which of the following is a component of foreign capital?

Direct inter government loans

Loans from international institutions (e.g. World Bank, IMF, ADB)

Soft loans for e.g. from affiliates of World Bank such as IDA

All the above

Q. 3

Which of the following would be an example of foreign direct investment from Country X?

A firm in Country X buys bonds issued by a Chinese computer manufacturer.

A computer firm in Country X enters into a contract with a Malaysian firm for the latter to make and sell to it processors

Mr. Z a citizen of Country X buys a controlling share in an Italian electronics firm

None of the above

Q. 4

Which of the following types of FDI includes creation of fresh assets and production facilities in the host country?

Brownfield investment

Merger and acquisition

Greenfield investment

Strategic alliances

Q. 5

Which is the leading country in respect of inflow of FDI to India?

Mauritius

USA

Japan

USA

Q. 6

An argument in favour of direct foreign investment is that it tends to

promote rural development

increase access to modern technology

protect domestic industries

keep inflation under control

Q. 7

Based on the supply and demand model of determination of exchange rate, which of the following ought to cause the domestic currency of Country X to appreciate against dollar?

The US decides not to import from Country X

An increase in remittances from the employees who are employed abroad to their families in the home country

Increased imports by consumers of Country X

Repayment of foreign debts by Country X

Q. 8

All else equal, which of the following is true if consumers of India develop taste for imported commodities and decide to buy more from the US?

The demand curve for dollars shifts to the right and Indian Rupee appreciates

The supply of US dollars shrinks and, therefore, import prices decrease

The demand curve for dollars shifts to the right and Indian Rupee depreciates

The demand curve for dollars shifts to the left and leads to an increase in exchange rate

Q. 9

‘The nominal exchange rate is expressed in units of one currency per unit of the other currency. A real exchange rate adjusts this for changes in price levels’. The statements are

wholly correct

partially correct

wholly incorrect

None of the above

Q. 10

Match the following by choosing the term which has the same meaning

i)       floating exchange rate                    ii)      fixed exchange rate

iii)        pegged exchange rate                        a.       depreciation

iv)        devaluation                                         b.       revaluation

v)         appreciation               c.                      flexible exchange rate

(i c); (ii d); (iii b); (iv a))

(i b); (ii a); (iii d); (iv c)

(i a ); (ii d ) ; (iii b); (iv c)

(i d); ( ii a); (iii b); (iv c)

Q. 11

Choose the correct statement..

An indirect quote is the number of units of a local currency exchangeable for one unit of a foreign currency

the fixed exchange rate regime is said to be efficient and highly transparent.

A direct quote is the number of units of a local currency exchangeable for one unit of a foreign currency

Exchange rates are generally fixed by the central bank of the country

Q. 12

Which of the following statements is true?

Home-currency appreciation or foreign-currency depreciation takes place when there is a decrease in the home currency price of foreign currency

Home-currency depreciation takes place when there is an increase in the home currency price of the foreign currency

Home-currency depreciation is the same as foreign-currency appreciation and implies that the home currency has become relatively less valuable.

All the above

Q. 13

Which of the following culminated in the establishment of the World Trade Organization?
(a)
(b)

The Doha Round

The Tokyo Round

The Uruguay Round

The Kennedy Round

Q. 14

Choose the correct statement

(a)

The GATT was meant to prevent exploitation of poor countries by richer countries

The GATT dealt with trade in goods only, while, the WTO covers services as well as intellectual property.

All members of the World Trade Organization are required to avoid tariffs of all types (

All the above

Q. 15

The ‘National treatment’ principle stands for

the procedures within the WTO for resolving disagreements about trade policy among countries

the principle that imported products are to be treated no worse in the domestic market than the local ones

exported products are to be treated no worse in the domestic market than the local ones

imported products should have the same tariff, no matter where they are imported from

Q. 16

Bound tariff’ refers to

(a)

(b

clubbing of tariffs of different commodities into one common measure

the lower limit of the tariff below which a nation cannot be taxing its imports

the upper limit on the tariff that a country can levy on a particular good, according to its commitments under the GATT and WTO.

the limit within which the country’s export duty should fall so that there are cheaper exports

Q. 17

The essence of ‘MFN principle’ is

equality of treatment of all member countries of WTO in respect of matters related to trade

favour one, country, you need to favour all in the same manner

every WTO member will treat all its trading partners equally without any prejudice and discrimination

all the above

Q. 18

The World Trade Organization (WTO)

(

(d)

has now been replaced by the GATT

has an inbuilt mechanism to settle disputes among members

was established to ensure free and fair trade internationally.

(b) and c) above

Q. 19

The Agreement on Agriculture includes explicit and binding commitments made by WTO Member governments

(

on increasing agricultural productivity and rural development

market access and agricultural credit support

market access, domestic support and export subsidies

market access, import subsidies and export subsidies

Q. 20

A tariff on imports is beneficial to domestic producers of the imported good because

they get a part of the tariff revenue

it raises the price for which they can sell their product in the domestic market

it determines the quantity that can be imported to the country

it reduces their producer surplus, making them more efficient

Q. 21

A tax applied as a percentage of the value of an imported good is known as

preferential tariff

ad valorem tariff

specific tariff

mixed or compound tariff

Q. 22

Escalated tariff refers to

nominal tariff rates on raw materials which are greater than tariffs on manufactured products

nominal tariff rates on manufactured products which are greater than tariffs on raw materials

a tariff which is escalated to prohibit imports of a particular good to protect domestic industries

none of the above

Q. 23

Voluntary export restraints involve:

an importing country voluntarily restraining the quantity of goods that can be exported into the country during a specified period of time

domestic firms agreeing to limit the quantity foreign products sold in their domestic markets

an exporting country voluntarily restraining the quantity of goods that can be exported out of a country during a specified period of time

quantitative restrictions imposed by the importing country's government.

Q. 24

1. Anti-dumping duties are

additional import duties so as to offset the effects of exporting firm's unfair charging of prices in the foreign market which are lower than production costs.

additional import duties so as to offset the effects of exporting firm's increased competitiveness due to subsidies by government

additional import duties so as to offset the effects of exporting firm's unfair charging of lower prices in the foreign market

Both (a) and (c) above

Q. 25

A countervailing duty is

a tariff that aim to offset artificially low prices charged by exporters who enjoy export subsidies and tax concessions in their home country

charged by importing countries to ensure fair and market-oriented pricing of imported products

charged by importing countries to protect domestic industries and firms from unfair price advantage arising from subsidies

All the above

Q. 26

The theory of absolute advantage states that

national wealth and power are best served by increasing exports and decreasing imports

nations can increase their economic well-being by specializing in the production of goods they produce more efficiently than anyone else.

that the value or price of a commodity depends exclusively on the amount of labour going into its production and therefore factor prices will be the same

differences in absolute advantage explains differences in factor endowments in different countries

Q. 27

Which of the following theories advocates that countries should produce those goods for which it has the greatest relative advantage?

Modern theory of international trade

The factor endowment theory

The Heckscher-Ohlin Theory

None of the above

Q. 28

Which of the following holds that a country can increase its wealth by encouraging exports and discouraging imports

Capitalism

Socialism

Mercantilism

Laissez faire

Q. 29

According to the theory of comparative advantage

trade is a zero-sum game so that the net change in wealth or benefits among the participants is zero.

trade is not a zero-sum game so that the net change in wealth or benefits among the participants is positive

nothing definite can be said about the gains from trade

gains from trade depends upon factor endowment and utilization

Q. 30

Given the number of labour hours to produce wheat and rice in two countries and that these countries specialise and engage in trade at a relative price of 1:1 what will be the gain of country X?

Labour cost (hours) for production of one unit

Wheat

Rice

Country X

10

20

Country Y

20

10

20 labour hours

10 labour hours

30 labour hours

Does not gain anything

International Trade

Marks: 30

Labour cost (hours) for production of one unit