Related Questions

Q1. What are the different types of trade barriers that countries use to protect their domestic industries?

Ans. Different types of trade barriers are discussed as follows:

a)  Specific Tariff: The fixed price charged on a specific product.

b) Licenses: licenses are the permission given by the government to trade in their country.

c) Import quotas: Certain goods can only be imported in limited quantities. These restrictions on the quantity of these goods are said to be import quotas.

Q2. What role do international organizations, such as the World Trade Organization, play in regulating foreign trade?

Ans. a) WTO establishes the rules for foreign trade.

b) It is the organization that makes negotiations in trade agreements.

c) It helps developing countries for growth.

d) It also helps to settle arguments and disputes between different countries.

Q3. How does international trade affect a country’s balance of trade?

Ans. When a country’s net export exceeds the net import, it is said to be a positive balance of trade. When a country’s net import exceeds the net export, it is said to be a negative balance of trade.

Q4. How has globalization affected foreign trade over the past few decades?

Ans. Globalization helped in making connections among countries all over the world. It enhanced the trade between different countries globally. It made communication easy among countries and helped in facilitating more variety of products globally. Thus, helped in the overall growth and development of countries.

Q5. How do countries determine their exchange rates? How do exchange rates affect international trade?

Ans. Various factors affect the exchange rate of a country. These are:

a) Inflation

b) Demand and Supply

c) Political and economic conditions

d) Money supply

e) Interest rates

When there is an increment in the exchange rate, the currency’s value is also increased and due to this, the prices of the product are also increased which results in, lesser exports from the country and increase in imports into that country.

Q6. What is the impact of foreign trade on a country’s GDP and economic growth?

Ans. a) Foreign trade increases healthy competition.

b) It helps in the capital formation of a country.

c) It enhances the productivity of the firms.

d) It acts as a tool for enhancing technological Advancement.

e) It helps in removing poverty from a country through economic growth.

f) The country’s GDP will be increased.

g) It enhances the best utilization of resources of a country.

Foreign Trade is the exchange of goods and services between two countries in the international market. Foreign Trade facilitates both buyers and producers to buy and sell goods in the international market. Goods travel from one country to another country. Foreign trade provides raw materials and finished goods to countries, that have a scarcity of those products. Natural resources are not equally available in all the countries. Some have an abundance of certain resources and some lack those resources completely. So, foreign trade helps both these countries to meet their requirements through imports and exports. By exporting goods, a country finds the market for its excess resources, and with imports a country fulfils its need for scarce resources.

For example: During the Diwali season, the Indian Market faces huge demand for decorative lights and bulbs. To fulfil this demand Indian market choose to import these items from China.

Foreign trade helps to expand the reach of sellers to global markets and thus helps to create more employment opportunities and raise the standard of living. The most commonly traded items through foreign trade are consumer goods and capital goods such as television, clothing, machinery, etc. Other transactions involve raw materials and services. Private and central banks play an important role in facilitating this trade between the two countries.