Skip to content
Multiple Choice Questions · Q1

Q.Trade between two countries is termed as

(a) Internal trade
(b) External trade
(c) International trade
(d) Local trade
CBSENCERTSubjective· 1mImportance★★★★★
9% · 1/11 Questions
✓ Free question

Trade between two countries is called international trade (or external trade), as it crosses national borders.

International trade is the exchange of goods, services, and capital across national boundaries. When two countries engage in buying and selling with each other, they are participating in international trade. This is distinct from trade that happens within a single country, which is known as internal or domestic trade.

The key difference lies in the jurisdiction. Internal trade occurs within the geographical limits of one nation, subject to its own laws, taxes, and currency. International trade, by contrast, involves two separate legal systems, different currencies, and often tariffs, quotas, and trade agreements. For example, a farmer selling wheat in the same state is internal trade; that farmer exporting wheat to another country is international trade.

Note

The terms "external trade" and "international trade" are often used interchangeably, though "international trade" is the more precise and commonly used term in economics.

The options given in the question are:

  • (a) Internal trade – This is trade within the borders of a single country, so it is incorrect.
  • (b) External trade – This is a synonym for international trade, but it is less formal. While not wrong, it is not the standard term.
  • (c) International trade – This is the correct and standard term for trade between two or more countries.
  • (d) Local trade – This refers to trade within a small area, like a town or district, and is a subset of internal trade.
Important

In economics and commerce, the standard term for trade between two countries is international trade. "External trade" is sometimes used in a broader sense to include all trade with foreign countries, but "international trade" is the precise answer.

✓Final answer

In short, trade between two countries is termed international trade (option c), as it involves the exchange of goods and services across national borders.

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests

Full access for 14 days. No credit card required.