Foreign Sector (VSAQs)

Economics-2 | 8. Foreign Sector – VSAQs:
Welcome to VSAQs in Chapter 8: Foreign Sector. This page includes the most important FAQs for Very Short Answer Questions. Each answer is given in simple English and follows the exam format. This approach helps in mastering essential concepts and aiming for top marks in your final exams.

VSAQ-1: Foreign Direct Investment (FDI) (OR) Write about FDI.

Foreign Direct Investment (FDI) refers to when companies or individuals from one country invest their money in businesses or assets in another country. For example, if a company from the United States builds a factory in India, that’s FDI. This kind of investment brings capital (money), skills, and technology into the country receiving the investment, which helps boost its economy. FDI often helps a country grow faster by improving its technology and increasing its ability to produce goods and services more efficiently.

VSAQ-2: Balance of Trade (OR) Balance of Trade – (163).

The Balance of Trade (BOT) is like a scorecard that shows the difference between a country’s exports (what it sells to other countries) and its imports (what it buys from other countries). Imagine it as a simple calculation: if a country sells more than it buys, it has a surplus (which is good). But if it buys more than it sells, it has a deficit (which is less favorable). The BOT helps us understand how well a country is doing in international trade. For example, if India exports more tea than it imports, it will have a trade surplus in that area.

VSAQ-3: WTO Objectives.

The World Trade Organization (WTO) is an international body that helps countries trade with each other smoothly and fairly. The WTO’s goals include improving people’s living standards (how well people live), increasing income (money people earn), creating more jobs, and making sure resources are used efficiently. The WTO also focuses on sustainable development, which means growing economies while protecting the environment for future generations. So, the WTO tries to balance economic growth with taking care of the planet.

VSAQ-4: Dunkel Proposals.

The Dunkel Proposals, named after Arthur Dunkel, were important suggestions made to wrap up the Uruguay Round of trade talks in 1993. These proposals covered a wide range of trade issues, like tariffs (taxes on imports), agriculture, and subsidies (government financial support). They laid the foundation for creating the World Trade Organization (WTO), which now oversees global trade rules.

VSAQ-5: Balance of Payments (OR) Define Balance of Payments. (OR) Write about the Balance of Payments.

The Balance of Payments is like a country’s financial diary. It records all the financial and economic transactions that happen between a country and the rest of the world over a certain period. According to the International Monetary Fund (IMF), it includes all the money that comes into the country and all the money that goes out, such as trade, investments, and foreign aid. This record helps the country understand its financial health and its position in the global economy.

VSAQ-6: GATT Objectives (OR) What are the Objectives of GATT?

The General Agreement on Tariffs and Trade (GATT) was created to help countries trade more freely and fairly. Here’s what GATT aimed to do:

  1. Most Favoured Nations (MFN) Principle: GATT members agreed to treat all other member countries the same way. If one country gets a good trade deal, all other members should get the same deal.
  2. Protection of Domestic Industry Through Tariffs: Countries could use tariffs (taxes on imports) to protect their local businesses from too much foreign competition.
  3. Trade Based on Non-Discrimination, Reciprocity, and Transparency: GATT encouraged fair trade by making sure countries treated each other equally (non-discrimination), offered equal treatment in return (reciprocity), and kept their trade rules clear and open (transparency).
  4. Liberalization of Tariffs and Non-Tariff Measures: GATT worked to lower tariffs and other barriers to trade, making it easier for countries to buy and sell goods and services globally.