Civil Services Prep

Prelims 2016 · Economy · Question 43

Which of the following best describes the term 'import cover', sometimes seen in the news?

  1. It is the ratio of value of imports to the Gross Domestic Product of a country
  2. It is the total value of imports of a country in a year
  3. It is the ratio between the value of exports and that of imports between two countries
  4. It is the number of months of imports that could be paid for by a country's international reserves

Answer

It is the number of months of imports that could be paid for by a country's international reserves

  • (a) Incorrect. Import cover is not imports as a share of GDP; that is an import intensity/trade ratio type measure.
  • (b) Incorrect. This is merely the annual import bill, not import cover.
  • (c) Incorrect. This describes an export-import ratio/bilateral trade ratio, not import cover.
  • (d) Correct. Import cover means the number of months of imports that can be financed by a country’s foreign exchange/international reserves.
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