The World Trade Organization, established on 1 January 1995, replaced which body?

The correct answer is B, external sector. The balance of payments is the statement that records every economic transaction between the residents of a country and the rest of the world in a given period, which is precisely what the external sector of an economy means; it covers merchandise trade, services, income, transfers and capital flows. Option A is wrong because the agriculture sector is a producing sector within the domestic economy and is measured through output and national income accounts, not through the balance of payments. Option C is wrong because the government sector is tracked through the budget and the fiscal deficit, which are internal accounts. Option D is wrong because the private sector is likewise a domestic classification, covering households and firms, and appears in savings and investment data. The other three are all parts of the internal economy, while only the external sector looks outward.

The correct answer is C, Export Security. Export security is not a recognised category of trade barrier; it is not a device that restricts the movement of goods across a border. Option A is wrong as a choice because subsidies are treated as a barrier: by lowering the cost of domestic producers they make imported goods uncompetitive, and the World Trade Organization disciplines them for that reason. Option B is wrong because an embargo is the strongest of all barriers, an outright ban on trade with a particular country or in a particular good. Option D is wrong because tariff barriers, chiefly customs duty, are the classic barrier, raising the price of the imported good in the home market. Keep the two families apart: tariff barriers act on price, while non-tariff barriers such as quotas, embargoes, licensing and standards act on quantity or on entry itself.

The correct answer is D, tariffs and quotas. An inward-looking trade strategy, better known as import substitution, was the policy India followed from the Second Five Year Plan until 1991, and it rested on two instruments. A tariff is a tax on imports that makes the foreign good dearer, and a quota is a limit on the quantity that may be imported at all. Option A is wrong because subsidies help exporters or domestic producers but are not the paired instrument named in the textbook definition of protection. Option B is wrong for the same reason, and because it leaves out the tariff, which is the primary instrument. Option C is wrong because price controls are a domestic measure aimed at consumers and essential goods; they do not act at the border. Remember the textbook pairing: protection equals tariffs plus quotas.

The correct answer is B. Self-reliance, the goal set out in India's early plans, means building the capacity to produce at home what the country would otherwise have to buy abroad, so the true indicator is that imports of such goods are avoided. It is a statement about reducing dependence, not about ending trade. Option A is wrong because rising imports of goods the country can itself make is the opposite of self-reliance and shows growing dependence. Option C is wrong because a country cannot export in quantity what it does not produce, and in any case exports are a sign of competitiveness rather than of self-reliance. Option D is wrong because avoiding exports of goods that can be produced at home wastes earning capacity; self-reliance was never meant to mean shutting out foreign markets. The policy that followed from this idea was import substitution.

The correct answer is A, only exports and imports of goods. The balance of trade, also called the merchandise or visible balance, is the difference between the value of goods exported and goods imported; nothing else enters it. Option B is wrong because once services are added the figure becomes the balance on goods and services, a step towards the current account but not the balance of trade. Option C is wrong because the current and capital accounts together make up the whole balance of payments, of which the balance of trade is only one component. Option D is wrong because foreign investment, whether direct or portfolio, belongs to the capital account and never to the trade balance. This is the single most common confusion in the chapter, so fix the ladder in order: balance of trade, then current account, then balance of payments.