Globalisation - Questions & Answers

QUESTIONS

MULTIPLE CHOICE QUESTIONS

1. Globalisation shall result in
(a) lesser competition among producers      (b) greater competition among producers
(c) greater competition among buyers      (d) destruction of large-scale producers
Answer: (b) greater competition among producers

2. The most common route for investments by MNCs in countries around the world is to
(a) set up new factories      (b) buy existing local companies
(c) form partnership with local companies      (d) none of these
Answer: (b) buy existing local companies

3. Which one of the following is a major benefit of joint production between a local company and multinational company?
(a) MNC can bring latest technology in the production.      (b) MNC can control the increase in price.
(c) MNC can buy the local company      (d) MNC can sell the products under their brand name.
Answer: (a) MNC can bring latest technology in the production.

4. Tax on imports is an example of
(a) Terms of trade      (b) Collateral      (c) Trade barriers      (d) Foreign trade
Answer: (c) Trade barriers

5. Removing barriers or restrictions set by the government is known as
(a) globalisation      (b) privatisation      (c) liberalisation      (d) fair trade practice
Answer: (c) liberalisation

6. Effect of Chinese toys on Indian toy market is
(a) no effect      (b) making profit      (c) suffering from losses      (d) none of these
Answer: (c) suffering from losses

7. Which one of the following is not true regarding impact of globalisation in India?
(a) It has created jobs in the service sector.
(b) People with education, skill and wealth have not been benefitted.
(c) Benefits of globalisation are not shared equally.
(d) Labour laws are not implemented properly and workers are denied of their rights.
Answer: (b) People with education, skill and wealth have not been benefitted.

8. _______ means integrating the domestic economy with the world economy.
(a) Globalisation      (b) Privatisation      (c) Liberalisation      (d) Disinvestment
Answer: Globalisation

9. When was the New Economic Policy announced?
(a) 1991      (b) 2001      (c) 1995      (d) 2004
Answer: (a) 1991

10. Which of the following is a 'barrier' of foreign trade?
(a) Import quota      (b) Tax on imports      (c) Tax on local trade      (d) Both (a) and (b)
Answer: (d) Both (a) and (b)

11. Why did the government decide to remove barriers on foreign trade and foreign competitor?
(a) To earn the foreign exchange      (b) To complete with producers in the world market
(c) To bring faster growth in the economy      (d) All of these
Answer: (d) All of these

12. Ranbaxy is a multinational company which is associated with
(a) automobiles      (b) cell phones      (c) medicines      (d) none of these
Answer: (c) medicines

13. Which of the following describes as a positive impact of globalisation for India?
(a) Greater access to global markets      (b) High technology
(c) Increased possibility of large industries of India to become MNC      (d) All of these
Answer: (d) All of these

14. Globalisation of the Indian Economy is the outcome of :
(a) Rapid Growth in IT technology      (b) Liberalisation measures
(c) Both (a) and (b)      (d) Outsourcing
Answer: (c) Both (a) and (b)

15. WTO was established in the year 1948.
(a) True      (b) False      (c) Can't say      (d) None of these
Answer: (b) False

16. Which of the following statements is/are true?
I. Globalisation removes inefficiency among industrial firms which become careless in the absence of competition
II. The activities of MNCs are spread across the countries
Alternatives :
(a) Only I      (b) Only II      (c) Both I and II      (d) None of these
Answer: (c) Both I and II

ASSERTION AND REASONING / MATCHING QUESTIONS

1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): New Economic Policy (NEP) introduced in 1991 initiated liberalisation of the Indian Economy.
Reason (R): Liberalisation, privatisation and globalisation are 3 main components of the New Economic Policy.
Alternatives :
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

2. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Technology has stimulated globalisation process.
Reason (R): The use of computers, internet mobile phones have made contact with each other around the world.
Alternatives :
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

3. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): WTO was established in 1995 to facilitate international trade.
Reason (R): The WTO agreements cover only trade in goods.
Alternatives :
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer: (c) Assertion (A) is true but Reason (R) is false.

4. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): India has become a favourable destination of outsourcing for most of the MNC'S.
Reason (R): India has vast skilled and cheap manpower which enhances the faith of MNCs for outsourcing in India.
Alternatives :
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

5. Identify the correct sequence of alternatives given in Column II by matching them with respective terms in Column I:
Column I      Column II
(A) Globalisation      (i) Promotes multilateral trade
(B) Privatisation      (ii) Integeration of Indian economy with the world economy
(C) Liberalisation      (iii) Removal of restrictions on trade and industry
(D) WTO      (iv) gives greater role to private sector
Choose the correct alternative:
(a) A - (i), (B) - (ii), (C) - (i), (D) - (iii)
(b) A - (iv), (B) - (iii), (C) - (i), (D) - (ii)
(c) A - (ii), (B) - (iv), (C) - (iii), (D) - (i)
(d) A - (ii), (B) - (i), (C) - (iv), (D) - (iii)
Answer: (c) A - (ii), (B) - (iv), (C) - (iii), (D) - (i)

SHORT ANSWER TYPE QUESTIONS

1. What is meant by liberalisation?
Answer: Liberalisation implies liberating trade and industry from unwanted government controls and restrictions.

2. What is globalisation?
Answer: Globalisation means integrating our economy with the world economy.

3. Mention any two factors that have facilitated the globalisation process.
Answer: (i) Technological advancement in India (ii) Liberalisation of foreign trade & investment.

4. What is WTO?
Answer: WTO (World Trade Organization) is an international body under the United Nations whose aim is to liberalise international trade.

5. Write any two negative impacts of globalisation on Indian economy.
Answer: (i) Globalisation is posing a big threat to small producers as they cannot withstand the competition arising from MNCs. (ii) Standards of living have improved only in urban areas. It has increased the income and quality of consumption of only high income groups. Poverty is still widespread in the country.

6. What is SEZ?
Answer: Special economic zones (SEZs) refers to those industrial zones which have world class infrastructural facilities like electricity, roads, transport, storage, water, recreational and educational facilities. They are mainly set up by the government to attract foreign investment.

7. What do you mean a Multinational Corporation?
Answer: A MNC is a large company that owns or controls production and marketing operations in two or more countries.

8. Suggest one way to promote foreign investment in India.
Answer: Liberalisation of foreign investment policy.

LONG ANSWER TYPE QUESTIONS

1. Explain how technology has promoted globalisation process.
Answer: The dramatic improvement in transportation technology has played a vital role in faster delivery of goods across long distances at lower costs and in the movement of people from one country to another in a short time. Information and communication technology has also played a major role in globalisation. Many MNCs are service-based companies. Therefore, the transfer of information is very vital to them. Computer, internet facilities, telegraph, telephones, mobile phones and the fax are used to contact one another around the world to access information instantly and to communicate from remote areas.

2. How has liberalisation of trade and investment policies helped the globalisation process?
Answer: Liberalisation of foreign trade and investment policy has speeded up the globalisation process. Since 1991, India has removed trade barriers and as a result foreign goods have flooded in the Indian market. Barriers on foreign investment were also removed to a large extent enabling many MNCs to set up their factories (plants) in India. In this way, liberalisation has helped the globalisation process.

3. Mention any three positive impacts of globalisation.
Answer: (i) Growth Rate: The growth rate of GDP increased from 5.6 per cent during 1980-91 to 8.2 per cent during 2007-12. (ii) Technology: Modern technologies and management services are being provided by MNCs in India. (iii) Inflow of Foreign Capital: The inflow of foreign currency in the country has increased as MNCs bring capital in foreign currency.

4. Briefly describe the functions & objectives of WTO.
Answer: Functions of WTO: (i) Monitoring WTO trade agreements (ii) Handling of trade disputes (iii) Providing technical assistance and training to developing countries and (iv) To co-operate with other international organisations. Objectives of WTO: (i) To promote multilateral trade, i.e., trade among many nations. (ii) Progressive liberalisation and elimination of tariffs and other barriers to trade in goods as well as services. (iii) To promote world trade so that every member country is benefitted. (iv) To expand and utilise world resources in the most optimum manner. (v) To enhance competition among all trading partners so as to benefit the consumers.

5. Explain the various liberalisation measures undertaken by the government of India since 1991.
Answer: (1) Lifting of Trade Barriers: Barriers on foreign trade like removal of quantitative restrictions on imports, cut in custom duties, export duties and barriers on foreign investment were removed to a large extent. (2) Special Economic Zones (SEZs): The government established several SEZs where world class infrastructural facilities were made available to foreign companies. (3) Relaxation in Foreign Exchange Controls: Foreign exchange controls were relaxed permitting liberal transactions in foreign currencies on current account. (4) Flexibility in Labour Laws: Foreign companies were allowed flexibility in labour laws so that they could employ workers for short periods (on temporary basis). (5) Make in India: Government has launched a massive programme inviting foreign investors to come to India and utilise the potential of cheap labour and land costs.

6. How has globalisation been beneficial to both the producers as well as the consumers in India?
Answer: Beneficial to Producers: The entry of MNCs has promoted competition in the domestic market. Tata Motors, Infosys, Ranbaxy, Asian Paints and Sundaram Fastners are some of the Indian companies which have benefitted from the increased competition. Beneficial to Consumers: We have a wide variety of goods and services before us in the market. The latest models of the digital cameras, mobile phones and televisions made by leading manufacturers of the world are available in the market at competitive prices.

7. What is globalisation? Mention any two positive and two negative impacts of globalisation in India.
Answer: Globalisation means integrating our economy with the world economy. Two positive impacts are: (1) Transfer of technology (modern technologies provided by MNCs) and (2) Inflow of foreign capital. Two negative impacts are: (1) Globalisation is posing a big threat to small producers as they cannot withstand the competition arising from MNCs and (2) Standards of living have improved only in urban areas, poverty is still widespread in the country.

8. Define outsourcing. Why has become India a favourite destination for outsourcing.
Answer: Outsourcing means hiring of services by MNCs from external sources. India has become a favourite destination for outsourcing because: (i) Availability of Cheap Labour: Wage rates in India are comparatively lower than that of in the developed countries. (ii) Reasonable Degree of Skills: India has vast manpower with fairly reasonable degree of skills and techniques. (iii) Favourable Government Policies: MNCs get various type of lucrative offers from the Indian government like tax holidays, low tax rates, etc.

9. Globalisation process has resulted in unbalance growth in India. Discuss.
Answer: The impact of globalisation has not been uniform. Globalisation have resulted in the concentration of growth process in urban areas. All MNCs are establishing their units in highly developed urban areas where they find adequate infrastructural facilities. As a result, rural-urban gap is widening. The growth process is just IT-based growth process. The growth has been concentrated only in some select areas in the service sector such as telecommunication, information technology, finance, entertainment, travel and hospitality services, real estate and trade. Globalisation has by-passed the agricultural sector which provides livelihoods to millions of peoples in the country.

QUESTION BANK

1. Define the term globalisation.
Ans. Globalisation means integration of domestic economy with the world economy.

2. Define liberalisation.
Ans. Liberalisation implies removal of unwanted government controls and restrictions on trade and industry.

3. What is meant by trade barrier?
Ans. Trade barrier refers to the hurdles that are put by the government in the way of free flow of goods and services. There hurdles may include tax on import, fixing quotas, licensing, etc.

4. What is a Multinational Corporation (MNC)?
Ans. A MNC is a large company that owns or controls production and marketing in two or more countries.

5. What is foreign investment?
Ans. Foreign investment means investment made by a MNC in foreign countries.

6. Explain the meaning of foreign direct investment.
Ans. Foreign direct investment means investment of foreign assets into the domestic country.

7. What is outsourcing?
Ans. Obtaining goods and services by a company from outside sources that earlier were produced by the company.

8. What is WTO? When was it set up?
Ans. (a) WTO is an organisation whose aim is to liberalise international trade. (b) It was set up in 1995.

9. What is meant by SEZ?
Ans. Special economic zones (SEZs) refers to those industrial zones which have world class infrastructural facilities. They are mainly set up by the government to attract foreign investment.

10. Why are tariffs imposed?
Ans. Tariffs (import duties) are imposed to protect domestic industries from foreign competition. They make foreign goods expensive.

11. Describe any three ways in which countries can be linked through globalisation.
Ans. (i) By movement of goods and services. (ii) By movement of investments and technology. (iii) By movement of people between countries.

12. "Foreign trade is an important component of globalisation". Explain any three points in this regard.
Ans. (i) Foreign trade implies exchange of goods and services across the countries. (ii) It helps to expand the size of market for producers. (iii) Consumers can get commodities produced in any part of the world. (iv) It works to integrate markets in different countries.

13. How do MNCs help in the growth of the local companies?
OR
How are the local companies benefited by collaborating with the multinational companies? Explain with examples.
Ans. (i) MNCs provide money as additional investment. (ii) MNCs provide latest technology for production.

14. In what ways is MNC different from other companies? Explain.
Ans. (i) The activities of a MNC are spread across the countries. While other companies are local in their existence. (ii) MNC has a huge capital base (resource) compared to other companies.

15. India has certain advantages which makes it a favourite outsourcing destination. What are these advantages?
Ans. Outsourcing means hiring of services by MNCs from external sources. The following points qualify India to be the favourite destination for outsourcing by various MNCs: (i) Availability of Cheap Labour: Wage rates in India are comparatively lower than that of in the developed countries, MNCs find it economically feasible to outsource their business to India. (ii) Reasonable Degree of Skills: India has vast manpower with fairly reasonable degree of skills and techniques. (iii) Favourable Government Policies: MNCs get various type of lucrative offers from the Indian government like tax holidays, low tax rates, etc.

16. Do you think outsourcing is good for India? Why are developed countries opposing it?
Ans. (a) Yes. Outsourcing is good for India. Outsourcing has generated new employment opportunities for India. It has enabled the flow of foreign exchanges to the country.
(b) Why opposed by developed countries: Developed countries like USA are strongly opposing outsourcing because it has caused unemployment in their own countries.

17. 'The impact of globalisation has not been uniform'. Explain this statement in your own words.
Ans. • Globalisation have resulted in the concentration of growth process in urban areas. All MNCs are establishing their units in highly developed urban areas where they find adequate infrastructural facilities. As a result, rural-urban gap is widening.
• The growth process is just IT-based growth process. The growth has been concentrated only in some select areas in the service sector such as telecommunication, information technology, finance, entertainment, travel and hospitality services, real estate and trade. Globalisation has by-passed the agricultural sector which provides livelihoods to millions of peoples in the country.

18. Explain how liberalisation has helped the globalisation process.
OR
"Globalisation is the outcome of liberalisation." Comment.
Ans. Liberalisation of foreign trade and investment policy has speeded up the globalisation process. Since 1991, India has removed trade barriers and as a result foreign goods have flooded in the Indian market. Barriers on foreign investment were also removed to a large extent enabling many MNCs to set up their factories (plants) in India. In this way, liberalisation has helped the globalisation process.

19. Explain how advancement in technology has helped the globalisation process.
Ans. • The dramatic improvement in transportation technology has played a vital role in faster delivery of goods across long distances lower costs and in the movement of people from one country to another in a short time.
• Information and communication technology has also played a major role in globalisation. Many MNCs are service based companies. Therefore, the transfer of information is very vital to them. Computer, internet facilities, telegraph, telephones, mobile phones and the fax are used to contact one another around the world to access information instantly and to communicate from remote areas.