Read this article to learn about the top eleven frequently asked questions on International Economic Environment.

Q.1. What is meant by globalisation?

Ans.  Globalisation is a process of increasing integration and growing economic inter­dependence of countries.

It is a process through which domestic economies are opened up. Thus, globalisation refers to the extension of economic activities across borders.


Q.2. What are the major dimensions of globalisation?

Ans. There are four broad dimensions of globalisation. These are international trade, international investment, international finance and multi-country network of multinational corporations.

Q.3. Name the major elements of international trading environment.

Ans. The three crucial elements of international business environment are:


(i) International trade policy,

(ii) Existing politico-economic situation or international power and influence, and

(iii) International trading institutions.

Q.4. What is ‘free trade’?


Ans. By ‘free trade’ we mean absence of restrictions on trade. Government does not intervene in trading activities. Thus, free trade eliminates tariffs and duties.

Q.5. Mention four important objectives of the International Monetary Fund.

Ans. (i) To promote international monetary cooperation,

(ii) To facilitate the expansion and balanced growth of trade,

(iii) To promote exchange stability, and

(iv) To assist in the establishment of a multilateral system of payments are the four major objectives of the IMF.

Q.6. What is “Bretton Woods System”?

Ans. The first 25 years (1946-1970) of activity of the IMF is known as the “Bretton Woods System”. The System provided exchange rate stability in the short run, but allows for the possibility of exchange rate adjustment when a country experiences fundamental disequilibrium in its BOP country.

Q.7. What are the main functions of the World Bank?


Ans. The World Bank:

(i) Assists in the construction and development of territories of its members;

(ii) Promotes private investment and long run balanced growth of trade and BOP equilibrium; and

(iii) Provides finance to projects, etc.


Q.8. What are the principles of GATT?

Ans. The three guiding principles of GATT are: reciprocity, transparency and non-­discrimination.

Q.9. Mention at least four functions of WTO.



Indicate two major objectives of forming World Trade Organisation.

Ans. First, WTO facilitates the implemen­tation, administration and operation of the WTO trade agreements.

Secondly, it provides a forum for negotiation among member countries.

Thirdly, it monitors national trade policies.

Fourthly, it provides technical assistance and training to its members—developing countries.

Q.10. What is counter-trade?


Ans. Counter-trade is the direct or indirect exchange of goods for other goods in international trade. It is, thus, a form of barter in international trade when currency is not used for payments.

Q. 11. What are the essential ingredients of globalisation of the Indian economy?

Ans. The three essential ingredients of globalisation of India are:

(i) Privatisation of the public sector,

(ii) Dismantling of bureaucratic controls and regulations, and

(iii) Opening up and the closer integration of the Indian economy with the world economy through deregulation of trade and finance, etc..