Q.1. A) 1. c 2. b
B) 1. External trade 2. Engineering goods
C) 1. Entrepot trade 2. Balance of trade 3. Export trade
D) 1. d 2. a
Q.2. 1. Concept: Trade deficit Explanation: i. Balance of trade is the difference between the value of a country’s exports and imports for a given period. If import value is greater than the export value, it is called as trade deficit. ii. Hence, this illustration relates to the concept of ‘trade deficit’ as the imports of Bhutan are double of their exports.
2. Concept: Foreign trade Explanation: i. Foreign trade refers to trade between different countries of the world. ii. Hence, this illustration relates to the concept of ‘foreign trade’ as Japan (i.e. one country) sells phones to Myanmar (i.e. another country)
Q.3. 1.
Internal trade International trade 1) Internal Trade refers to trade within the 1) International trade refers to trade boundaries of a nation. between different countries. 2) It is also known as ‘Domestic Trade’ or 2) It is also known as ‘Foreign Trade’ or ‘Home Trade’. ‘External Trade’. 3) E.g.: Goods produced in Maharashtra are 3) E.g.: India imports petroleum from Iraq sold to Uttar Pradesh. and exports tea to Singapore. 4) It does not result in inflow or outflow of 4) It results in inflow or outflow of foreign foreign exchange. exchange.
2. Balance of payments Balance of trade 1) It is a systematic record of all international 1) It refers to the difference between the economic transactions of a country during value of a country’s exports and imports given period, usually a year. for given period. 1 Std. XII: Economics
2) It is defined as “a summary statement of all 2) It is defined as “the relation over a period the transactions between the residents of between the values of her exports and one country and the rest of the world.” imports of physical goods.” 3) It includes the value of exchange of goods 3) It includes the value of imports and and services among citizens, businessmen, exports of visible goods and invisible firms, government etc. goods. 4) Balance of payment is broader concept than 4) Balance of trade is a part of balance of balance of trade. payment.
Q.4. 1. Foreign trade refers to trade between different countries of the world. Trade plays an important role in economic development. It is basically engine of growth. In developed countries, trade accounts for significant share of Gross Domestic Product (GDP). The role of foreign trade can be explained as follows: 1) ENCOURAGES INVESTMENT Foreign trade creates an opportunity for the producers to reach out to customers beyond the domestic markets. So, it encourages them to produce more goods for the purpose of exports. This leads to a rise in total investment in economy. 2) ADDS TO REPUTATION AND HELPS EARN GOODWILL Foreign trade enables exporting country to earn reputation and goodwill in the international market. E.g.: Countries like Japan, Germany, Switzerland etc. have earned goodwill and reputation in foreign markets for their qualitative production of electronic goods. 3) TO EARN FOREIGN EXCHANGE Foreign trade provides foreign exchange which can be used for very productive purposes. Foreign trade contributes to expanding the market and encouraging production. 4) DIVISION OF LABOUR AND SPECIALIZATION Some countries have plentiful natural resources. Ideally, such countries should export raw materials and import finished goods from the countries which have abundant supply of skilled manpower. Foreign trade leads to division of labour and specialization at world level. It gives benefits to all countries. 5) OPTIMUM ALLOCATION AND UTILIZATION OF RESOURCES As a result of specialization, resources are used for the production of only those goods which give highest returns, i.e. resources are put to their best use. So, foreign trade enables rational allocation and specialization of resources at the international level. 6) STABILITY IN PRICE LEVEL Foreign trade helps to maintain the stable demand and supply position. So, it stabilizes the price level in the economy. 7) AVAILABILITY OF MULTIPLE CHOICES Due to foreign trade, many products from foreign countries become available in the domestic market. So, consumers get a choice of wide variety of imported commodities. The foreign trade is highly competitive and so, the products are standardized and of a good quality. It raises the standard of living of people.
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