12th Standard Economics English Medium - International Economics 3 Mark Book Back Question Paper and Answer Key 2022 - 2023 | QB365

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12th Standard Economics English Medium - International Economics 3 Mark Book Back Question Paper and Answer Key 2022 - 2023

Published on: 02/09/2022

QB365 provides a detailed and simple solution for every Possible Book Back Questions in Class 12 Economics Subject - International Economics , English Medium. It will help Students to get more practice questions, Students can Practice these question papers in addition to score best marks.

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Questions:

Generic 3

7 x 3 = 21

State the objectives of Foreign Direct Investment.

Write a brief note on flexible exchange rate.

What are import quotas?

Distinguish between Balance of Trade and Balance of Payments.

Explain the Net Barter Terms of Trade and Gross Barter Terms of Trade.

Compare the Classical Theory of international trade with Modern Theory of International trade.

Describe the subject matter of International Economics.

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Answers Key:

Generic 3

7 x 3 = 21

FDI has the following objectives.
(i) Sales Expansion
(ii) Acquisition of resources
(iii) Diversification
(iv) Minimization of competitive risk

Also known as floating exchange rate, the exchange rates are freely determined in an open market by market forces of demand and supply.

(i) It is a trade restriction that sets a limit on the quantity of a good that can be imported into a country in a given period of time.
(ii) Quotas are used to benefit the producers of good in that economy.

S.No	Balance of Trade (BOT)	Balance of Payments (BOP)
1	Only export and import of commodities are included in BoT	Export and import of commodities and services are included in BoP
2	i.e. Movement of goods or visible trade	Trade in both visible and non visible items.

Net Barter Terms of Trade
1. This was developed by Taussig in 1927.
2. The ratio between the prices of exports and of imports is called net barter terms of trade.
3. Viner calls it commodity terms of trade.
4. \(\mathrm{T}_{\mathrm{n}}=\left(\mathrm{P}_{\mathrm{x}} / \mathrm{P}_{\mathrm{m}}\right) \times 100\)
5. Tn is Net Barter Terms of Trade
6. Px is Index number of export prices
7. Pm is Index number of import prices
8. This measures the gain from International Trade.
9. If T_n is greater than 100, it is terms of trade which means that for a rupee of export, more of imports can be received by a country.
Gross Barter Terms of Trade
1. Developed by Taussig in 1927 as an improvement over the net terms of trade.
2. It is an index of relationship between total physical quantity of imports and the total physical quantity of exports.
\(\mathrm{Tg}=\left(\mathrm{Q}_{\mathrm{m}} / \mathrm{Q}_{\mathrm{x}}\right) \times 100\)
3. Q_m is Index of import quantities
4. Q_x is Index of export quantities
5. If for a given quantity of export, more quantity of import can be consumed by a country, the terms of trade are favourable.

S.No	Classical Theory of International Trade	Modern Theory of International Trade
1	International trade is on the basis of labour theory of value.	International trade is on the basis of general theory of value.
2	It presents a one factor (labour) model.	It presents a multi factor (labour and capital) model.
3	It attributes the differences in the comparative costs to differences in the productive efficiency of workers in the two countries.	It attributes the differences in comparative costs to the differences in factor endowments in the two countries.

S.No

Classical Theory of
International Trade

Modern Theory of International Trade

International trade is on the basis of labour theory of value.

International trade is on the basis of general theory of value.

It presents a one factor (labour) model.

It presents a multi factor (labour and capital) model.

It attributes the differences in the comparative costs to differences in the productive efficiency of workers in the two countries.

It attributes the differences in comparative costs to the differences in factor endowments in the two countries.

Pure Theory of Trade
(i) This component explains the causes for foreign trade, composition, direction and volume of trade, determination of the terms of trade and exchange rate, issues related to balance of trade and balance of payments.
Policy Issues
(i) Policy issues such as free trade vs. protection, methods of regulating trade, capital and technology flows, use of taxation, subsidies and dumping, exchange control and convertibility, foreign aid, external borrowings and foreign direct investment, measures of correcting disequilibrium in BoP are covered.
International Cartels and Trade Blocs
(i) Economic integration, cartels, customs unions, monetary unions, trade blocs, economic unions and multinational corporation are covered
International Financial and Trade Regulatory Institutions
(i) Financial institutions like IMF, IBRD, WTO are part of International Economics.