1. What were the three types of movements or flows within international economic exchanges ? (2 Marks )
Answer:
- Flow of trade i.e., trade in goods.
- Flow of labour i.e., migration of poeple in search of employment.
- Movement of capital for short-term or long-term investments over long distances.
Answer:
Indentured labor are the bonded laborer under contract to work for an employer for a specific amount of time, to pay off his passage to a new country or home.
The reasons were as mentioned below :
- Decline of cottage industries.
- Rise in land rent.
- Clearing of lands for mines and plantations.
Answer:
- When exchange rates are fixed, the governments intervene to prevent movements in them.
- Flexible or floating exchange rates fluctuate depending on demand and supply of currencies in foreign exchange markets is principle without interference by the governments
4. Describe the effects of the Great Depression on the US. (3 Marks )
Answer:
Major effects of the Great Depression on the US were as given below :
Fall in prices.
- The price of Agricultural and Industrial goods were fallen into very cheaper rate
- US banks reduced domestic lending and asked people to return their loans.
- People, however, could not repay the loans due to lesser incomes.
- They were forced to give up their homes, cars and other consumer durables.
- Unemployment increased.
- People trudged long distances looking for any work they could find.
- US banking system collapsed as it could not recover loans and repay depositors.
- Thousands of banks went bankrupt and were closed. By 1933, over 4,000 banks had closed.
- Between 1929 and 1932 about 1,10,000 companies had collapsed.
5. What steps were taken by economists and politicians of the world to meet the global economic crisis that arose after World War II? (3 Marks )
Answer:
- The Second World War caused an immense amount of economic devastation and social disruption.
- To preserve economic stability and full employment in the industrial world a Conference was held in 1944 at Bretton Woods, USA.
- The Bretton Woods Conference established the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (Popularly known as World Bank) to finance post-war reconstruction.
- But as Europe and Japan rapidly rebuilt their economies, they grew less dependent on the IMF and the World Bank.
- Thus from the late 1950s the Bretton Woods institutions began to shift their attention more towards developing countries.
Answer:
The factors or circumstances leading to the end of the Bretton Woods system and the beginning of ‘Globalisation’ are as given below :
- From the 1960s, US finances and competitive strength weakened due to rising costs of its overseas involvements.
- US dollar was no longer a principal currency in the world. It could not maintain its value in relation to gold.
- Weakening of US position led to the collapse of fixed exchange rates.
- Its place was taken up by floating exchange rates.
- From mid-1970s, the developing countries were forced to borrow from Western Commercial banks and private lending institutions.
- This resulted in debt-crises, lower income and increase in poverty in Africa and Latin America.
- The industrial countries were also hit by unemployment from the mid-1970s and remained high until the early 1990s.
- MNCs began to shift production operations to low-wage Asian countries to earn more profits.
- Low wages in China made that country an attractive destination for investment by MNCs to capture world markets.
- Some other incidents like new economic policies in China, the collapse of Soviet Union and Soviet-style communism in Eastern Europe brought many countries into the fold of the world economy.
- These activities increased world trade and capital flows.