PREVIOUS YEAR SOLVED PAPERS - November 2017
46. Who among the following has given Absolute Advantage Model of international trade?
- Option : A
- Explanation : One of the most important theories in international business is comparative advantage model. The theory foundation goes up to Adam Smith, a Scottish economist. In his book, Wealth of Nations, he argued that trade is not a zero-sum game. He illustrated how both parties can benefit from trading. His argument is labelled as the absolute advantage theory. The logic of absolute advantage is simple and intuitive. If country X can produce a set of goods with lower costs or higher productivity than country Y, and meanwhile, country Y can produce another set of goods with lower costs or higher productivity than country X, the trade of these goods benefit both country X and country Y. But what if a country has all or none absolute advantages in all sets of goods?
Thus, Adam Smith’s absolute advantage theory was superseded by the comparative advantage theory in the 1800s.
47. Which among the following is not an international economic institution?
- Option : D
- Explanation : International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.
- Option : C
- Explanation : Government of India, initiated “Structural Adjustment Programme” since July 1991. It is also known as new economic policy of 1991. The objective is to make the Indian Economy more outward oriented and to provide “free play of market forces”. Globalization can not be successful without liberalization. By the term “Liberalization” we means the removal of unnecessary control in laws and procedures, and “Globalization,” on the other hand means the opening of the economy to the world by removing barriers against free flow of trade, technology and investment.
