Business Environment and International Business MCQ Quiz - Objective Question with Answer for Business Environment and International Business - Download Free PDF

The correct answer is 1 and 2 only.

Key Points

• The balance of payments (BoP) records the transactions in goods, services, and assets between residents of a country with the rest of the world. There are two main accounts in the BoP – the current account and the capital account. The current account records exports and imports in goods and services and transfer payments.

Important Points

• Balance of Payment (BoP) of a country can be defined as a systematic statement of all economic transactions of a country with the rest of the world during a specific period usually one year.
• It indicates whether the country has a surplus or a deficit in trade.
• When exports exceed imports, there is a trade surplus and when imports exceed exports there is a trade deficit.
• Components of BoP:
  • For preparing BoP accounts, economic transactions between a country and the rest of the world are grouped under - Current account, Capital account, and Errors and Omissions. It also shows changes in Foreign Exchange Reserves.
  • Current Account: It shows export and import of visible (also called merchandise or goods - represent trade balance) and invisible (also called non-merchandise).
    • Invisibles include services, transfers, and income.
    • Hence statement 1 and 2 is correct.
  • Capital Account: It shows a capital expenditure and income for a country.
    • It gives a summary of the net flow of both private and public investment into an economy.
  • External Commercial Borrowing (ECB), Foreign Direct Investment, Foreign Portfolio Investment, etc form a part of the capital account. 

SAARC:

• The South Asian Association for Regional Cooperation (SAARC) was founded in Dhaka on 8 December 1985 and was dedicated to economic, social, technological, and cultural development emphasizing collective self-reliance.
• It is the regional intergovernmental organization and geopolitical union of states in South Asia.
• The SAARC is headquartered in Kathmandu, Nepal.
• Its seven founding member states are Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka.
• Afganistan joined the organization in 2007.
• There are 11 areas of cooperation which includes agriculture; education, sports, and culture; population, health, and child welfare; the environment and meteorology; rural development; transport; tourism; communications; science and technology; women in development; and the prevention of drug trafficking and drug abuse. 
• It launched the South Asian Free Trade Area (SAFTA) in 2006.
• The SAARC maintains permanent diplomatic relations at the UN as an observer and has developed links with multilateral entities, including the European Union.

Therefore, Brazil is not a member of SAARC.

The correct answer is 1986.

Key Points

• The Consumer Protection Act was enacted in 1986 to protect the interests of consumers in India.
• This Act provides for the establishment of consumer councils and other authorities for the settlement of consumers' disputes and for matters connected therewith.
• The Act aims to promote and protect the rights of consumers such as the right to be informed about the quality, quantity, potency, purity, standard, and price of goods or services.
• It empowers consumers to seek redressal against unfair trade practices and exploitation.
• Under this Act, a three-tier quasi-judicial machinery at the district, state, and national levels has been established for speedy redressal of consumer disputes.

Additional Information

• Consumer Rights:
  • The right to be protected against marketing of goods and services which are hazardous to life and property.
  • The right to be informed about the quality, quantity, potency, purity, standard, and price of goods or services.
  • The right to be assured, wherever possible, access to a variety of goods and services at competitive prices.
  • The right to be heard and to be assured that consumers' interests will receive due consideration at appropriate forums.
  • The right to seek redressal against unfair or restrictive trade practices or unscrupulous exploitation of consumers.
• Consumer Dispute Redressal Agencies:
  • District Consumer Disputes Redressal Forum (DCDRF) at the district level.
  • State Consumer Disputes Redressal Commission (SCDRC) at the state level.
  • National Consumer Disputes Redressal Commission (NCDRC) at the national level.
• Recent Amendments:
  • The Consumer Protection Act, 2019, replaced the Consumer Protection Act, 1986.
  • The new Act includes provisions for product liability and brings e-commerce under its purview.
  • It also establishes the Central Consumer Protection Authority (CCPA) to promote, protect, and enforce the rights of consumers.
• Product Liability:
  • Product liability refers to the liability of a manufacturer or seller for any harm caused to a consumer by a defective product.
  • The Consumer Protection Act, 2019, introduced provisions for filing complaints against manufacturers or sellers for product liability claims.

The correct answer is A - III, B - IV, C - I, D - II. 

Important Points

(a) It seeks to protect and promote the interest of consumers - (iii) The Consumer Protection Act 2019:
The Consumer Protection Act 2019 is a comprehensive legislation in India that aims to protect the rights and interests of consumers. It establishes consumer rights, such as the right to be informed, right to safety, right to choose, right to be heard, and right to seek redressal. The act provides a legal framework for consumer complaints, dispute resolution, and the establishment of consumer forums and commissions to address consumer grievances.

(b) It aims to check adulteration of food articles - (iv) The Prevention of Food Adulteration Act, 1954:
The Prevention of Food Adulteration Act, 1954, is an important law in India that aims to prevent the adulteration of food and ensure food safety. It prohibits the addition of harmful substances to food items, sets standards for food quality, and prescribes penalties for violations. The act is essential in safeguarding public health and ensuring that consumers receive safe and unadulterated food products.

(c) It provides protection against underweight and undermeasure of products - (i) The Standards of Weights and Measures Act, 1976:
The Standards of Weights and Measures Act, 1976, is a law in India that regulates weights and measures used in trade and commerce. The act ensures fair trade practices by mandating the use of standardized weights and measures to prevent underweight or undermeasure of products. It also sets guidelines for weighing and measuring instruments to maintain accuracy and transparency in transactions.

(d) It provides protection against fraudulent marks on products - (ii) The Trade Marks Act, 1999:
The Trade Marks Act, 1999, is a law in India that governs the registration and protection of trademarks. Trademarks are distinctive marks, logos, symbols, or words used to identify and distinguish goods or services of one company from those of others. The act provides legal protection to registered trademarks, preventing others from using similar marks that may cause confusion or deceive consumers. It safeguards brand identity and helps consumers make informed choices.

So, the correct matching of List I with List II is A - III, B - IV, C - I, D - II.

The correct answer is - i, iii, v, vi

Key Points

• Dispute Settlement Body (DSB)
  • The DSB is responsible for settling disputes between member countries regarding the interpretation and application of WTO agreements.
  • It has the authority to establish panels of experts to consider the case, adopt panel and appellate reports, and oversee the implementation of rulings and recommendations.
• Trade Policy Review Body (TPRB)
  • The TPRB conducts regular reviews of the trade policies and practices of all WTO members.
  • It aims to improve transparency and understanding of countries' trade policies and practices and their impact on the multilateral trading system.
• Council for Trade in Goods
  • This body oversees the General Agreement on Tariffs and Trade (GATT), which deals with the global rules of trade between nations at the goods level.
  • It manages and supervises the implementation of various agreements related to trade in goods.
• Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)
  • The TRIPS Council monitors the operation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
  • It provides a forum for consultation on issues related to intellectual property and trade.

Additional Information

• USMCA (United States-Mexico-Canada Agreement)
  • It is a trade agreement between the United States, Mexico, and Canada, which replaced NAFTA (North American Free Trade Agreement) in 2020.
  • It is not a body of the WTO but a separate regional trade agreement.
• ASEAN (Association of Southeast Asian Nations)
  • ASEAN is a regional intergovernmental organization comprising ten Southeast Asian countries, which promotes political and economic cooperation and regional stability.
  • It is not part of the WTO but collaborates with it on various trade-related issues.
• GATT (General Agreement on Tariffs and Trade)
  • GATT was established in 1947 to regulate international trade by reducing tariffs and other trade barriers.
  • In 1995, the GATT was incorporated into the WTO framework as the Council for Trade in Goods.

The correct answer is Washington D. C.

Key Points

• International Monetary Fund headquarters is located at Washington D. C in the United States. It was founded in 1944.
• International Monetary Fund is an Organization of 190 countries.
• It is working to secure financial stability, facilitate international trade, promote high employment and economic growth and reduce poverty around the world.

Important Points

• The IMF was founded in July 1944 at the United Nations Bretton Woods Conference in New Hampshire, United States.
•  Kristalina Ivanova Georgieva is a Bulgarian economist serving as chair and managing director of the International Monetary Fund since 2019.

Additional Information

​The correct answer is 1995.

Key Points

• WTO (World Trade Organization) was established in 1995.
• The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
• It acts as a forum for negotiating trade agreements, it settles trade disputes between its members and it supports the needs of developing countries.
• The WTO has over 160 members representing 98 per cent of world trade. Over 20 countries are seeking to join the WTO.
• Ngozi Okonjo-Iweala is the seventh Director-General of the WTO. She took office on 1 March 2021, becoming the first woman and the first African to serve as Director-General.

Additional Information

• The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
• At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.
• Over the past 20 years, WTO members have agreed with major updates to the WTO rulebook to improve the flow of global trade. The WTO's membership has expanded to 164 members, representing over 98% of international trade. In 2015.
• The WTO reached a significant milestone with the receipt of its 500th trade dispute for settlement.

The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand. Currently, there are 10 permanent members of this association. Its headquarter is in Jakarta (Indonesia).

Key Points

1. The creation of ASEAN was motivated by a common fear of communism.
2. The Association of Southeast Asian Nations is a regional intergovernmental organization comprising ten countries in Southeast Asia, which promotes intergovernmental cooperation and facilitates economic, political, security, military, educational, and sociocultural integration among its members and other countries in Asia.
3. Members are Indonesia, Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia, Laos, Singapore, and Brunei. Observers are East Timor and Papua New Guinea. 
4. India could not become a member of this association due to its geographical location. India is a part of South-Asia while ASEAN is an organization of South-East Asian Nations. On July 23, 1996; ASEAN gave advisory status to India.

Thus, option 1 is the correct answer.

The correct answer is external sector.Key Points

• The balance of payments summarizes an economy's international economic dealings. 
• These transactions consist of transfer payments as well as the export and import of products, services, and financial assets (like foreign aid).
• The current account, the capital account, and the financial account are the three primary subcategories of the BOP.
• The influx and outflow of goods and services into a nation are represented by the current account.
• All overseas capital transfers are noted in the capital account.
• International monetary flows associated with investments in companies, properties, bonds, and stocks are recorded in the financial account.
• The BOP should be 0 when the current account is in balance with the total of the capital and finance accounts, but this rarely happens.

Additional Information

• The balance of payments deficit is the shortfall when autonomous foreign exchange payments exceed autonomous foreign exchange receipts.
• Foreign exchange transactions that are done independently of the state's balance of payments and for a person's own benefit are referred to as autonomous transactions.

The correct answer is Balance of trade ​.

Key Points

• The difference between the value of a country's exports and the value of its imports for a certain period is known as the balance of trade (BOT).
• The main component of a country's balance of payments is the balance of trade (BOP).
• The balance of trade between a country's goods and the balance of trade between its services are sometimes reported separately. The trade balance, also known as the international trade balance, commercial balance, or net exports, is a term used to describe the balance of commerce.
• The total value of exports minus the total value of imports is a simple method for determining the BOT. The BOT is a metric used by economists to assess a country's economic strength.
• A trade deficit or a negative trade balance is when a country buys more products and services in terms of value than it exports. A trade surplus or positive trade balance occurs when a country exports more products and services than it imports.

Bretton Woods Conference resulted in the establishment of the IMF and IBRD.

Explanation:

1. It was an agreement negotiated in July 1944 by 730 delegates from 44 Nations at the United Monetary & Financial conference held in Bretton Woods, New Hampshire thus getting its name 'Bretton Woods Agreement'.
2. Under this system, Gold was the basis for the US Dollar and the currencies of other Nations were pegged to the US Dollar's value.
3. The agreement ceased to operate in 1970 when US President Richard M Nixon denounced that the US would no longer exchange gold monetary value for US Currency.
4. The principal goals of institutionalizing an efficient foreign exchange system, prevention of arbitrary devaluation of currencies, and promotion of International Economic Growth were central focus which led to the creation of 2 important organization:
   • The International Monetary Fund(IMF)
   • The World Bank.
5. Post Bretton Wood agreement dissolution in the 1970s, the IMF & World Bank have still remained functional and pillars for the exchange of international currencies.
6. British Economist John Maynard Keynes and American Chief International Economist of the US Treasury Department Harry Dexter White were the designers of the Bretton Wood System which envisaged to establish a global central bank to ensure modest lending fund and a greater role for the US Dollar.
7. IMF monitors the exchange rates and identifies those Nations which require monetary support to balance their deficit financing.
8. World Bank also called the International Bank for Reconstruction & Development(IBRD) was established to manage funds and provide financial assistance to the devastated countries post world war 2 era.
9. World Bank also supports developmental cooperation by providing loans and grants to governments.

The correct answer is 1966.

• ADB (Asian Development Bank) was established in 1966.

Key Points

• Asian Development Bank(ADB):
  • It was established on 19 December 1966.
  • Its headquarters is in Manila, Phillippines.
  • It has currently 68 members.
  • Masatsugu Asakawa is the current President.
  • The ADB is a social development organization that is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.
  • ADB provide loans, grants and information sharing in infrastructure, health care services, financial and public administration systems, helping nations prepare for the impact of climate change or better manage their natural resources for its member states.

Important Points

•  India is a member of ADB.

The Consumer Protection Act, 1986:

1. An important landmark in the history of consumer protection legislation in India is the consumer protection Act,1986, which provides for a system for the protection of consumer rights and the redressal of consumer disputes. 
2. The Consumer Protection Act, 2019 received the assent of the President on 9th August 2019, and subsequently got notified on 20.07.2020. The old Act namely Consumer Protection Act, 1986 will be replaced by a new Act namely Consumer Protection Act,2019.

Consumer Disputes Redressal Agencies 

1. A District Forum in each State and
2. A State Commission in each State and
3. A National Commission.

• The National Commission was established by the Central Government in August 1988.
• The responsibility for the establishment of the other two agencies.
• The prior approval of the Central Government rests with the respective State Governments. 

The District Forum shall consist of:

1. A person who is has been, or is qualified to be a District Judge nominated by the State Government who shall be its President,
2. A person of eminence in the field of education, trade or Commerce, and
3. A lady social worker. 
   • Each State Commission shall consist of a person who is or has been a Judge of a High Court, appointed by the State Government (who shall be its President) and two other members who shall be a person of ability, integrity, and standing and have adequate knowledge or experience of or have shown capacity in dealing with a problem relating to economic, law, commerce, accountancy, industry, public affairs or administration, one of whom shall be a woman. 
   • The National Commission shall consist of a person who is or who has been a Judge of Supreme Court, appointed by the Central Government (who shall be its President) and two other members who shall be a person of ability, integrity, and standing and have adequate knowledge or experience of or have shown capacity in dealing with problem-related to economic, law, commerce, accountancy, industry, public affairs or administration, one of whom shall be a woman. 

The Consumer Protection Act, 1986 made provisions for the establishment of Consumer Protection Councils and other authorities for resolving consumers’ disputes. The Consumer Protection Councils would be set up at national and state levels (Section 6 of Consumer Protection Act).

Key Points

 The Consumer Protection Act provides for six rights of consumers. The consumer protection councils set up under the Act are intended to promote and protect the various rights of consumers.

• Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life and health.
• Right to be Informed: The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc.
• Right to Choose: The consumer has the freedom to choose from a variety of products at competitive prices.
• ​Right to be Heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or service.
• Right to seek Redressal: The consumer has a right to get relief in case the product or service falls short of his expectations.
• Right to Consumer Education: The consumer has a right to acquire knowledge about the product and to be a well-informed consumer throughout life.

Thus, it is clear that the government enacted the Consumer Protection Act as the Right to choose, educate, and safety.

Foreign Exchange Management Act – FEMA

1. The main objective for which FEMA was introduced in Indian was to facilitate external trade and payments.
2. In addition to this, FEMA was also formulated to assist the orderly development and maintenance of the Indian forex market.
3. FEMA outlines the formalities and procedures for the dealings of all foreign exchange transactions in India.
4. These foreign exchange transactions have been classified into two categories — Capital Account Transactions and Current Account Transactions.

Foreign Exchange Means Foreign Currency and Includes:

1. Deposits, credits, and balances payable in any foreign currency
2. Drafts, traveler's cheques, letters of credit, or bills of exchange expressed or drawn in Indian currency but payable in any foreign currency.
3. Drafts, traveler's cheques, letters of credit, or bills of exchange drawn by banks, institutions, or persons outside India but payable in Indian Currency.

• According to FEMA, foreign exchange includes drafts drawn by banks outside India and payable in Indian currency but it does not include any drafts drawn by banks outside India and payable in foreign currency.