Import Substitution Policies

Description: This quiz will test your knowledge on Import Substitution Policies.
Number of Questions: 15
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Tags: indian economics foreign trade and balance of payments import substitution policies
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What is the primary objective of import substitution policies?

  1. To reduce dependence on imports.

  2. To increase exports.

  3. To promote economic growth.

  4. To stabilize the exchange rate.


Correct Option: A
Explanation:

Import substitution policies aim to reduce a country's reliance on imports by promoting the production of goods domestically.

What are the main instruments used to implement import substitution policies?

  1. Tariffs.

  2. Quotas.

  3. Subsidies.

  4. All of the above.


Correct Option: D
Explanation:

Import substitution policies typically involve a combination of tariffs, quotas, and subsidies to protect domestic industries from foreign competition.

What are the potential benefits of import substitution policies?

  1. Increased economic growth.

  2. Reduced unemployment.

  3. Improved balance of payments.

  4. All of the above.


Correct Option: D
Explanation:

Import substitution policies can potentially lead to increased economic growth, reduced unemployment, and an improved balance of payments by promoting domestic production.

What are the potential drawbacks of import substitution policies?

  1. Higher prices for consumers.

  2. Reduced efficiency.

  3. Slower technological progress.

  4. All of the above.


Correct Option: D
Explanation:

Import substitution policies can potentially lead to higher prices for consumers, reduced efficiency, and slower technological progress due to the protection of inefficient domestic industries.

Which country is often cited as a successful example of import substitution policies?

  1. China.

  2. India.

  3. Brazil.

  4. South Korea.


Correct Option: D
Explanation:

South Korea is often cited as a successful example of import substitution policies due to its rapid economic growth and industrialization in the 1960s and 1970s.

Which country is often cited as an unsuccessful example of import substitution policies?

  1. Argentina.

  2. Chile.

  3. Mexico.

  4. Venezuela.


Correct Option: A
Explanation:

Argentina is often cited as an unsuccessful example of import substitution policies due to its history of economic instability and high inflation.

What is the Infant Industry Argument for import substitution policies?

  1. That new industries need temporary protection to become competitive.

  2. That import substitution policies are always beneficial.

  3. That import substitution policies should be permanent.

  4. That import substitution policies are only necessary for developing countries.


Correct Option: A
Explanation:

The Infant Industry Argument states that new industries need temporary protection from foreign competition in order to become competitive and achieve economies of scale.

What is the Balance of Payments Argument for import substitution policies?

  1. That import substitution policies are necessary to correct a trade deficit.

  2. That import substitution policies are always beneficial.

  3. That import substitution policies should be permanent.

  4. That import substitution policies are only necessary for developing countries.


Correct Option: A
Explanation:

The Balance of Payments Argument states that import substitution policies are necessary to correct a trade deficit and improve a country's balance of payments.

What is the National Security Argument for import substitution policies?

  1. That import substitution policies are necessary to protect national security.

  2. That import substitution policies are always beneficial.

  3. That import substitution policies should be permanent.

  4. That import substitution policies are only necessary for developing countries.


Correct Option: A
Explanation:

The National Security Argument states that import substitution policies are necessary to protect national security by ensuring that a country is not dependent on imports for essential goods.

What is the Employment Argument for import substitution policies?

  1. That import substitution policies are necessary to create jobs.

  2. That import substitution policies are always beneficial.

  3. That import substitution policies should be permanent.

  4. That import substitution policies are only necessary for developing countries.


Correct Option: A
Explanation:

The Employment Argument states that import substitution policies are necessary to create jobs by promoting domestic production and reducing imports.

What is the Infant Industry Argument against import substitution policies?

  1. That import substitution policies can lead to higher prices for consumers.

  2. That import substitution policies can reduce efficiency.

  3. That import substitution policies can slow technological progress.

  4. All of the above.


Correct Option: D
Explanation:

The Infant Industry Argument against import substitution policies states that they can lead to higher prices for consumers, reduced efficiency, and slower technological progress.

What is the Balance of Payments Argument against import substitution policies?

  1. That import substitution policies can lead to a trade deficit.

  2. That import substitution policies can reduce exports.

  3. That import substitution policies can lead to a weaker currency.

  4. All of the above.


Correct Option: D
Explanation:

The Balance of Payments Argument against import substitution policies states that they can lead to a trade deficit, reduced exports, and a weaker currency.

What is the National Security Argument against import substitution policies?

  1. That import substitution policies can make a country more dependent on imports.

  2. That import substitution policies can lead to a weaker military.

  3. That import substitution policies can make a country more vulnerable to economic coercion.

  4. All of the above.


Correct Option: D
Explanation:

The National Security Argument against import substitution policies states that they can make a country more dependent on imports, lead to a weaker military, and make a country more vulnerable to economic coercion.

What is the Employment Argument against import substitution policies?

  1. That import substitution policies can lead to higher unemployment.

  2. That import substitution policies can reduce wages.

  3. That import substitution policies can lead to a decline in the standard of living.

  4. All of the above.


Correct Option: D
Explanation:

The Employment Argument against import substitution policies states that they can lead to higher unemployment, reduced wages, and a decline in the standard of living.

What is the current consensus among economists on the effectiveness of import substitution policies?

  1. That import substitution policies are generally beneficial.

  2. That import substitution policies are generally harmful.

  3. That the effectiveness of import substitution policies depends on the specific circumstances of a country.

  4. That there is no consensus among economists on the effectiveness of import substitution policies.


Correct Option: C
Explanation:

The current consensus among economists is that the effectiveness of import substitution policies depends on the specific circumstances of a country, such as its level of development, its trade balance, and its industrial structure.

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