Page 114 - Understanding Economics for Class 10
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EXERCISES


                         1.  What do you understand by globalisation? Explain in your own words.
                       Ans.  Globalisation  is  a  process of  rapid  integration  or interconnection  between  countries  through
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                            foreign trade and foreign investments by Multinational Corporations (MNCs). More and more
                            goods  and services, investments and technology are moving between countries. Migration of
                            people from one country to another is also a way of globalisation.


                         2.  What were the reasons for putting barriers to foreign trade and foreign investment by the Indian
                            government? Why did it wish to remove these barriers?
                       Ans. The main reason for putting barriers to foreign trade and foreign investment by the Indian government
                            was to protect the producers and small industrialists of our country from foreign competition.
                            But later, it was accepted by the government that foreign competition would encourage Indian
                            industrialists to improve the quality of their products, and that removing these barriers would
                            increase trade and the quality of products produced in the country.


                         3.  How would flexibility in labour laws help companies?
                       Ans.  Flexibility in labour law helps companies to attract foreign investments. Instead of hiring
                            workers on a regular basis, companies hire workers flexibly for short periods when there is
                            intense pressure of work.  Workers are not provided with any extra benefit.  This is done to
                            reduce the cost of labour for the company. However, foreign companies  are still demanding
                            more flexibility in labour laws.


                          4.  What are the various ways in which MNCs set up, control or produce in other countries?
                       Ans.  (i) MNCs set up, control or produce in other countries by investing in setting up of factories
                               and offices for production in a country, MNCs look for place which is close to the markets;
                               cheap labour is available.
                           (ii) To increase production, MNCs collaborate with some local companies or MNCs buy local
                               companies.
                           (iii) The other way in which they control production is by placing orders for production with
                               small and local producers. These local producers have cheap labour and produce it efficiently
                               (at lower cost).


                         5.  Why do developed countries want developing countries to liberalise their trade and investment?
                            What do you think should the developing countries demand in return?
                       Ans.  Developed countries want developing countries to liberalise their trade and investment so that
                            they can set up their industries in small and developing nations, which are less expensive and
                            can earn them more profit. Labour and other resources are cheap in these countries which
                            results in low manufacturing  costs, and more profit. Also,  setting up factories and industries
                            in developed countries increases competition.
                            The developing countries should, in turn, ask for
                            (i) A fair removal of trade barriers in order to protect their own industries. If it is mutually
                               decided that there will be free trade and no barriers will be imposed then all countries should
                               follow it (developed countries also). If developed countries keep supporting their domestic
                               industries, then industries in developing countries will find it difficult to stand competition.
                           (ii) They should also ask MNCs to pay for setting up their base in developing countries.

             E-100                                                                                      Economics  Class X
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