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Questions and Answers
What is one of the primary objectives of the IMF regarding its member countries?
What is one of the primary objectives of the IMF regarding its member countries?
Which facility allows members to borrow up to 140% of their quota from the IMF?
Which facility allows members to borrow up to 140% of their quota from the IMF?
What is the significance of Special Drawing Rights (SDRs) created by the IMF?
What is the significance of Special Drawing Rights (SDRs) created by the IMF?
What percentage of a member's quota can be borrowed unconditionally in a year through the Basic Credit Facility?
What percentage of a member's quota can be borrowed unconditionally in a year through the Basic Credit Facility?
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Which function of the IMF involves providing technical consultancy to member countries?
Which function of the IMF involves providing technical consultancy to member countries?
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What are the Special Drawing Rights (SDRs) allocated based on?
What are the Special Drawing Rights (SDRs) allocated based on?
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Which of the following is NOT a function of the IMF?
Which of the following is NOT a function of the IMF?
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How does the Basic Credit Facility assist member nations?
How does the Basic Credit Facility assist member nations?
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What is the primary purpose of the Compensatory Financing Facility established by the IMF in 1963?
What is the primary purpose of the Compensatory Financing Facility established by the IMF in 1963?
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Which facility was introduced by the IMF to help stabilize prices of primary goods like food grains?
Which facility was introduced by the IMF to help stabilize prices of primary goods like food grains?
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What was a significant feature of the Structural Adjustment Facility and Enhanced Structural Adjustment Facility?
What was a significant feature of the Structural Adjustment Facility and Enhanced Structural Adjustment Facility?
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What role does the IMF play in achieving monetary discipline and cooperation among member countries?
What role does the IMF play in achieving monetary discipline and cooperation among member countries?
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How does the IMF assist member countries in meeting their foreign exchange requirements?
How does the IMF assist member countries in meeting their foreign exchange requirements?
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What is one of the main focuses of the IMF regarding developing countries?
What is one of the main focuses of the IMF regarding developing countries?
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Which facility was implemented to provide temporary supplemental financial assistance related to members' quota sizes?
Which facility was implemented to provide temporary supplemental financial assistance related to members' quota sizes?
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What is India's current quota in the IMF expressed in SDRs?
What is India's current quota in the IMF expressed in SDRs?
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Which of the following is NOT an objective of the IMF?
Which of the following is NOT an objective of the IMF?
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What type of assistance is primarily provided by the IMF for Balance of Payments issues?
What type of assistance is primarily provided by the IMF for Balance of Payments issues?
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Which of the following best describes Special Drawing Rights (SDRs)?
Which of the following best describes Special Drawing Rights (SDRs)?
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How does the World Bank primarily differentiate its loan types?
How does the World Bank primarily differentiate its loan types?
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What is one of the main purposes of the International Bank for Reconstruction and Development (IBRD)?
What is one of the main purposes of the International Bank for Reconstruction and Development (IBRD)?
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Which of the following statements about the IMF's role in international finance is incorrect?
Which of the following statements about the IMF's role in international finance is incorrect?
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What role does the IMF play when providing financial assistance to countries?
What role does the IMF play when providing financial assistance to countries?
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Study Notes
International Economics Introduction
- International Economics evolved from a simple theory of international trade.
- It originated in Western Europe due to increasing importance of foreign trade.
- Key figures in shaping International Economics include Adam Smith, David Haberler, Ricardo, F.W. Taussig, Haberler, J.S. Mill, and Bela Balassa.
Meaning of International Economics
- International Economics is the branch of economics focusing on the exchange of goods and services between two or more countries.
- It examines economic interdependence among countries and its impact.
Subject Matter of International Economics
- The subject matter is vast and categorized into different parts.
1. Pure Theory of Trade
- Explains the reasons for foreign trade, trade composition, volume, and direction.
- Details the determination of terms of trade and exchange rates.
- Discusses trade balances and balance of payments.
2. Policy Issues
- Examines free trade vs. protectionism and methods of trade regulation.
- Covers capital and technology flows, taxation, subsidies, dumping, exchange control, convertibility, foreign aid, and correcting disequilibria in the balance of payments.
Meaning of Trade
- Trade refers to the exchange of goods and merchandise.
- It's of two types: internal and international trade.
1. Internal Trade
- Exchange of goods and services within a country's borders.
- Also called domestic or intra-regional trade.
2. International Trade
- Exchange of goods and services between two or more countries.
- Synonymous with external trade or foreign trade or inter-regional trade.
Theories of International Trade
- Adam Smith introduced the theory of absolute cost advantage.
- David Ricardo developed the theory of comparative cost advantage.
Classical Trade Theories
- Mercantilism (pre-16th century)
- Absolute advantage (Adam Smith)
- Comparative advantage (David Ricardo)
International Cartels and Trade Blocs
- Focuses on economic integration, such as international cartels, customs unions, monetary unions, trade blocs, and MNCs (multinational corporations).
International Financial and Trade Regulatory Institutions
- Financial institutions such as IMF, IBRD, WTO that influence international economic transactions.
International Economics - Summary
- International Economics analyses the exchange of products and services across countries.
- It investigates the various facets of international trade, like tariffs, regulations, and investments.
- It also explores the impacts of these interactions on the global economy and individual countries.
Foreign Direct Investment (FDI)
- FDI is a significant aspect in the global economy.
- It's closely related to foreign trade and is influential in developing economies.
- FDI can lead to increased trade volume, substitute foreign trade, and accelerate economic growth.
Objectives of FDI
- Sales expansion
- Acquisition of resources
- Diversification
- Minimization of competitive risk.
Advantages of FDI
- Increase investment level, income, and employment in the host country
- Facilitates technology transfer to the recipient country
Disadvantages of FDI
- Prioritizing high-profit areas over other sectors
- Technologies may not be appropriate for the country's needs
- Adverse balance of payments
- Impact on national politics and fair trade practices
- Possible destruction or weakening of small and medium enterprises
International Monetary Fund (IMF)
- Aims to promote international monetary cooperation.
- Facilitates trade and balance growth.
- Eliminates exchange depreciations.
- Establishes multilateral trade/payment systems
- Promotes capital flow from developed to developing nations.
- Addresses the problem of international liquidity.
Functions of IMF
- Brings exchange rate stability.
- Corrects balance of payment disequilibria
- Sets par values for currencies.
- Balances currency demand/supply.
International Bank for Reconstruction and Development(IBRD) or World Bank
- Aims for reconstruction/development of war-torn countries
- Encourages capital investment.
- Fosters international trade.
- Establishes a peacetime economy.
- Protects the environment.
World Trade Organization (WTO)
- Supports multilateral trade.
- Sets guidelines for goods and services trade
- Reduces tariffs and other barriers to trade
- Eliminates trade discrimination
- Facilitates optimal use of global resources
- Enables developing countries to participate in world trade.
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Description
Explore the fundamental concepts of International Economics, which focuses on the exchange of goods and services between countries. This quiz delves into the history, key theorists, and various aspects such as trade theories and policy issues. Test your understanding of the economic interdependence among nations.
