NATIONAL LAW INSTITUTE UNIVERSITY

BHOPAL
B.A.LL.B. Hons.  III TRIMESTER
REPEAT EXAMINATION, AUGUST- 2009
INTERNATIONAL TRADE AND PUBLIC FINANCE
Time : 3 Hours Maximum Marks : 80

INSTRUCTIONS :
1. All questions are compulsory.
2. Marks carried by each question are mentioned against it.

Q1. Fill in the blanks:

i) The Heckscher-Ohlin theory predicts that a capital abundant country will
export _______.
ii) A tariff that is calculated as a percentage of the value of the product is called
an ______ tariff.
iii) Those tariffs which have both specific and ad valorem components are called
_______ tariffs.
iv) A ______ tariff is one that is so high that no goods are imported.
v) ______ transfers are those transfers which the residents of a country receive
without the obligation of making any present or future payment in return.
vi) The theory of absolute advantage was propounded by _______.
vii) The theory of comparative advantage was propounded by ______.
viii) Leontief paradox nullifies the_______ theorem.
ix) The WTO Agreement came into force with effect from ______.
x) A _______ is a compulsory levy payable by an economic unit to the government
without any corresponding entitlement to receive a definite and direct quid pro
quo from the government.
xi) The ______ is at the apex of the WTO’s organisation structure.
xii) When country A grants country B ______ status then it agrees to charge an
import tariff against country B’s goods that are no higher than those imposed
against goods of any other country.
xiii) If the value of imports exceed the value of exports, then a country is said to
have an unfavourable _______ of trade.
xiv) If country A has a comparative advantage in producing wheat, then its
opportunity cost of producing wheat is _______ among its trading partners.
xv) A nation has an Absolute advantage in the production of Good A, it can
produce more units of Good A then other nations can from a given quantity of
_______.

1
xvi) The doctrine which states that there are industries in which a country could
have a comparative advantage if only they could get started is called the
_______ argument.
(1x16=16 Marks)

Q2. Discuss critically the Ricardian theory of international trade.

(16 Marks)
OR
Explain Adam Smith’s model of absolute advantage.

Q3. Demonstrate the welfare effects of an imposition of tariffs on an importable

good.
(16 Marks)
OR
Demonstrate the welfare effects of an imposition of a quota on imported goods.

Q4. State the Heckscher-Ohlin theorem and examine the Leontief paradox.
(16 Marks)
OR
“Free Trade is better than aurarky”. Discuss and illustrate your answer with
suitable diagrams.

Q5. “Wagner’s theory points to an inevitable rise in government expenditure over

time”. Discuss.
(16 Marks)
OR
Critically examine the Wiseman Peacock hypothesis of public expenditure.