Page 123 - Understanding Economics for Class 10

2. What are SEZs?
Ans. Special Economic Zones (SEZ) is an area in a country that is subject to different economic
regulations than other regions within the same country. These regulations tend to be conducive
to foreign direct investment.
Goyal Brothers Prakashan
SEZs are to have world class facilities: electricity, water, roads, transport, storage, recreational
and educational facilities. Companies who set up production units in the SEZs do not have
to pay taxes for an initial period of 5 years.

3. Differentiate between investment and foreign investment.
Ans. The money that is spending to buy assets (land, building, machines and other equipment)
is called investment, while the investment made by the MNCs is called foreign investment.
In investment, the money flows within the country where as in foreign investment money
flows outside the country.

4. How has globalisation benefited well-of buyers?
Ans. The main interest areas or the industries in which MNCs are interested are: cell phones,
automobiles, electronics, soft drinks, fast food or services such as banking in urban areas.
These products are mainly demanded by well-off buyers. There is greater choice before these
consumers who now enjoy improved quality and lower prices for several products. As a
result, these people today, enjoy much higher standards of living than was possible earlier.

5. Describe the impact of flexibility of labour laws on the workers in India.
Ans. To attract foreign investment, labour laws were made flexible. It was mainly done to reduce
the labour cost and hence the total cost of production. Lives of workers have substantially
changed due to flexible labour laws and the pressure of competition.
Workers’ jobs are no longer secure, most employers prefer to employ workers ‘flexibly’.
Workers do not get any extra benefit like paid holiday, medical expenses etc. they do not
get their fair share of globalisation.

6. How do MNCs interlink production across countries. Explain with example
Ans. A MNC is a company that owns or controls production in more than one nation. MNCs
interlink production in the following ways:
(i) Offices and factories are set up by MNCs where they can get cheap labour and other resources
for the purpose of production. This is done to reduce the cost and increase the profits.
(ii) MNCs make investment by buying up local companies and then expand production.
This is the most common route of making investments by MNCs. It is easy for huge
companies to do so.
(iii) Example: A very large American MNC, Cargill Foods, has bought over smaller Indian
companies such as Parakh Foods. A large marketing network is built by Parakh Foods
in various parts of India, where its brand was well-reputed.

7. How has globalisation affected the lives of Indians?
Ans. Globalisation has affected the lives of Indian in many ways:
(i) Living standard of people has raised specially well-off sections in the urban areas.
(ii) Consumers have wider choices now.
(iii) Goods are available at lower prices and are of better quality due to increased competition
(iv) New job opportunities have been created for Indian companies particularly in providing
services like IT.
(v) A host of services such as data entry, accounting, engineering etc are now performed
at lesser cost in India.
(vi) Lives of workers have substantially changed due to globalisation and the pressure of competition.

Economics Class X E-109