International Trade MCQS

Q1. What is the main purpose of international trade?
a) To restrict imports
b) To increase domestic production only
c) To exchange goods and services across countries
d) To increase taxes on exports

Answer: c) To exchange goods and services across countries

Q2. Which theory explains that countries should specialize in producing goods where they have a lower opportunity cost?
a) Absolute Advantage
b) Comparative Advantage
c) Heckscher-Ohlin Theory
d) Product Life Cycle Theory

Answer: b) Comparative Advantage

Q3. Tariffs are:
a) Direct taxes on income
b) Taxes imposed on imported goods
c) Subsidies given to exporters
d) Quotas on exports

Answer: b) Taxes imposed on imported goods

Q4. Which organization promotes free trade among member countries globally?
a) WTO
b) IMF
c) World Bank
d) UN

Answer: a) WTO (World Trade Organization)

Q5. Balance of Payments (BoP) records:
a) The country’s income from all sources
b) The economic transactions between residents of one country and the rest of the world
c) The trade surplus of a country
d) The internal budget of a country

Answer: b) The economic transactions between residents of one country and the rest of the world

Q6. Which of the following is NOT a benefit of international trade?
a) Access to a wider variety of goods
b) Economic growth
c) Reduced competition in the domestic market
d) Increased employment opportunities

Answer: c) Reduced competition in the domestic market

Q7. Which of the following is a non-tariff barrier to international trade?
a) Import duty
b) Quota
c) Excise tax
d) Export subsidy

Answer: b) Quota

Q8. The term ‘Dumping’ in international trade refers to:
a) Selling goods in the domestic market below cost
b) Exporting goods at prices lower than the normal value to capture market share
c) Destroying defective goods
d) Hoarding goods for future sale

Answer: b) Exporting goods at prices lower than the normal value to capture market share

Q9. Which of these is a characteristic of Free Trade?
a) Imposition of tariffs
b) Removal of trade barriers
c) Strict import quotas
d) Government control on exports

Answer: b) Removal of trade barriers

Q10. The Heckscher-Ohlin Theory of international trade focuses on:
a) Differences in technology
b) Differences in factor endowments like labor and capital
c) Government trade policies
d) Consumer preferences

Answer: b) Differences in factor endowments like labor and capital

Q11. What is a Trade Deficit?
a) When exports exceed imports
b) When imports exceed exports
c) When a country has zero trade
d) When exports equal imports

Answer: b) When imports exceed exports

Q12. Which of the following agreements is related to regional economic cooperation?
a) NAFTA
b) WTO
c) IMF
d) World Bank

Answer: a) NAFTA (North American Free Trade Agreement)

Q13. Which is NOT part of the Balance of Payments account?
a) Current Account
b) Capital Account
c) Fiscal Account
d) Financial Account

Answer: c) Fiscal Account

Q14. What is the primary aim of the Export Promotion Policy?
a) To restrict exports
b) To encourage and increase exports
c) To control domestic prices
d) To increase imports

Answer: b) To encourage and increase exports

Q15. Which of the following terms refers to the reduction or removal of customs duties and other trade barriers between countries?
a) Protectionism
b) Liberalization
c) Nationalization
d) Globalization

Answer: b) Liberalization

Q16. What does the term ‘Balance of Trade’ mean?
a) The total value of exports minus the total value of imports
b) The total foreign investment received by a country
c) The amount of foreign currency reserves held by a country
d) The total value of goods produced within a country

Answer: a) The total value of exports minus the total value of imports

Q17. Which organization aims to promote international trade by reducing trade barriers?
a) IMF
b) WTO
c) World Bank
d) UNCTAD

Answer: b) WTO (World Trade Organization)

Q18. Which of the following is an example of a trade bloc?
a) ASEAN
b) IMF
c) World Bank
d) ILO

Answer: a) ASEAN (Association of Southeast Asian Nations)

Q19. What is a tariff?
a) A limit on the quantity of goods imported
b) A tax imposed on imported goods
c) A subsidy to domestic producers
d) A type of non-tariff barrier

Answer: b) A tax imposed on imported goods

Q20. Which of the following is true about a ‘Quota’ in international trade?
a) It is a tax on exports
b) It restricts the quantity of goods imported or exported
c) It is a subsidy for domestic industries
d) It encourages free trade

Answer: b) It restricts the quantity of goods imported or exported

Q21. What is meant by ‘Trade Liberalization’?
a) Increasing tariffs and trade restrictions
b) Removing or reducing trade barriers and tariffs
c) Promoting domestic industries through subsidies
d) Restricting foreign investments

Answer: b) Removing or reducing trade barriers and tariffs

Q22. Which country is known as the ‘Workshop of the World’ due to its strong manufacturing and exports?
a) India
b) China
c) USA
d) Japan

Answer: b) China

Q23. The ‘Most Favored Nation’ (MFN) status means:
a) A country gets preferential treatment over others in trade
b) All WTO member countries must be treated equally in trade
c) Only the richest countries get trade benefits
d) It is a bilateral trade agreement

Answer: b) All WTO member countries must be treated equally in trade

Q24. Which is a major reason countries engage in international trade?
a) To reduce competition
b) To utilize their comparative advantage
c) To isolate domestic markets
d) To increase taxes

Answer: b) To utilize their comparative advantage

Q25. Which of the following refers to the policy of protecting domestic industries from foreign competition?
a) Free trade
b) Protectionism
c) Liberalization
d) Globalization

Answer: b) Protectionism

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