Unit 5 External Sector: Role of Foreign Trade

Vocabulary flashcards covering the meaning of the external sector, definitions of foreign trade, exports, imports, and the key roles foreign trade plays in economic development.

External Sector

The economic relationship of a country with the rest of the world, encompassing all economic transactions between the domestic economy and foreign nations.

Foreign Trade

The exchange of goods and services between one country and other countries, connecting the domestic economy with the international economy.

Export

The act of selling domestic goods and services to other countries, such as India selling pharmaceuticals, textiles, or software services.

Import

The act of purchasing goods and services from other countries, such as buying crude oil, machinery, and electronic components.

Expansion of Market

A benefit of foreign trade allowing producers to sell beyond domestic borders, enabling firms to increase production and leverage a larger consumer base.

Specialisation in Production

A principle where countries concentrate on producing goods and services in which they possess a comparative advantage due to differences in resources, technology, climate, and skills.

Optimum Utilisation of Resources

The efficient allocation and use of a country's land, labour, and capital, driven by international demand and the ability to obtain scarce resources via imports.

Foreign Exchange

International currency earnings generated through exports, which are required to pay for imports and fulfill international financial obligations.

Capital Goods and Technology Imports

The importation of modern machinery, equipment, raw materials, and advanced technology that are not domestically available to improve industrial efficiency and capacity.

Industrial Development

The expansion, modernisation, and diversification of domestic industries stimulated by export demand, technological adoption, and investment in new machinery.

Employment Generation

Job creation resulting from expanded export production, affecting both direct manufacturing roles and indirect sectors like transportation, banking, insurance, warehousing, and logistics.

Availability of Wider Variety of Goods

The provision of diverse consumer goods, differing qualities, and new technologies from abroad that are domestically unavailable or limited, enhancing consumer choice and living standards.

External Sector

The economic relationship of a country with the rest of the world, encompassing all economic transactions between the domestic economy and foreign nations.

Foreign Trade

The exchange of goods and services between one country and other countries, which connects the domestic economy with the international economy.

Export

The act of a country selling goods and services to other countries, such as India selling pharmaceuticals, textiles, or software services.

Import

The act of purchasing goods and services from other countries, such as India buying crude oil, machinery, and electronic components.

Expansion of Market

The role of foreign trade that broadens sales opportunities for domestic goods and services beyond national borders, enabling firms to increase production.

Specialisation in Production

The concentration by a country on producing commodities in which it has a comparative advantage due to differences in resources, technology, climate, and skills.

Optimum Utilisation of Resources

The efficient allocation of a country's land, labour, and capital enabled by expanding advantaged industries and importing scarce resources from abroad.

Economic Growth

The increase in production, investment, and income driven by the additional demand that export expansion creates for domestically produced goods and services.

Foreign Exchange

Earnings acquired through exports that a country requires to pay for imports and settle international financial obligations.

Import of Capital Goods and Technology

The procurement of modern machinery, equipment, raw materials, and advanced technology from foreign nations to enhance domestic industrial capacity and efficiency.

Industrial Development

The promotion of domestic industrialisation caused by rising international export demand, prompting firms to invest in new machinery and improved techniques.

Employment Generation

The creation of work opportunities directly in expanding export industries and indirectly in supporting sectors like transportation, banking, insurance, warehousing, and logistics.

Availability of Wider Variety of Goods

The provision of diverse qualities, new products, and imported items not produced domestically or available only in limited supply, enhancing consumer choice.