Mercantilism is the first international trade theory suggested in the middle of 1500s.

Real and Monetary Side of International Economics

When we buy an imported commodity, say a famous brand automobile, we pay the amount in a foreign currency which refers to foreign exchange. When the domestic producer exports its products, he/she will be paid in foreign exchange. In these basic examples, we see monetary transactions as an integral part of international trade. Suppose that the foreign exchange rate increases within an economy. This increase in the foreign exchange rate can lead to an increase in the volume of exports and a decrease in the volume of imports of this nation. This simple example justifies how international monetary transactions affect international trade.

KEY TERMS AND CONCEPTS OF INTERNATIONAL TRADE-Exchange market

Lowering the value of the national currency by the decision of the Central Bank is called devaluation.

Every choice or option on the production possibilities frontier involves a tradeoff. In other words, some amounts of a commodity must be given up in order to get some more amounts of the other commodity. Due to the limited resources, every decision either about economics or about daily routines has a tradeoff. Thus, all tradeoffs involve a cost, referred as opportunity cost. Opportunity cost is the highest cost of the preferred alternative. Production possibilities frontier (PPF) gives the total supply of a country. Indifference curve (I) represents the total demand of a country.

Foreign exchange rate: International trade as well as international investments entail currency of the foreign country which is dealt with. The exchange of national currency with foreign currencies is done at the foreign exchange market

Real and Monetary Side of International Economics

The discipline of international economics is composed of two main parts: International trade and international money. International trade refers to the real side of international economics while international money refers to the monetary side of international economics. The analysis on international trade part takes the real transactions into consideration , leaving the money aside. In other words, international trade analysis is based on the physical movement of goods or services. In this respect, we can conjure up a simple system of barter. On the other hand, the international money part deals with the financial transactions like foreign exchange, foreign exchange markets, foreign exchange rate systems, payments among the nations, investment flows, and balance of payments.

The simplifying assumption of Heckscher-Ohlin Theory that states ‘one of the countries is labor-abundant and the other one is capital-abundant’ has a weakness because in the real world, it is not that easy to identify factor endowments of the countries. Since countries use more than two factors of production, it is impossible to find out the relative factor prices that are the determinants of the factor endowments without using factor price index.

One of the assumptions is that there is perfect competition in the commodities and the factor markets in both countries. In a perfectly competitive market, there are many firms that are producing a homogeneous commodity. Thus, the commodities within the market are identical in every respect. There are many consumers who are ready to buy the commodities that are produced identically.

Stolper-Samuelson Theorem depends on the International Factor Price Equalization Theorem. In spite of the similarities between them, Stolper Samuelson Theorem explains the distribution of income effects of international trade within a trading country while International Factor Price Equalization Theorem deals with the international distribution of income effects of international trade. According to the Stolper-Samuelson Theorem, international trade does not increase the income of all the factors of production but only the income of the factor that is intensively used in the production of the exported commodity. At the general equilibrium point of the International Factor Price Equalization Theorem, both the relative factor prices and relative commodity prices are equalized.

Artificial Intelligence (AI) is the design, implementation and use of the programs, machines and systems that expose human intelligence. In other words, the AI is the field of study that seeks to explain intelligent behavior via computer science. The correct answer is "B".

Theory of Absolute Advantage

The theory was introduced in Adam Smith’s “Wealth of Nations”, published in 1776. By assuming that each country could produce some commodities using less labour than its trading partners, he showed that all parties could benefit from international trade. Trade improved the allocation of labour, ensuring that each good would be produced in the country where the good’s production required the least labour. Result would be a larger total quantity of goods produced in the world. Trade would be a positive-sum game. A country has an absolute advantage in the production of a good relative to another country if it can produce the good at a lower cost or with a higher productivity. If the input prices are the same in both countries, the country with an absolute advantage will have lower unit production cost for that good. A country should produce and export products in which it has an absolute advantage, and a country should import products in which it has a disadvantage.

Community Indifference Curves

Offer curve: An offer curve gives the nation’s offer of quantity of exports and imports. In this respect, it demonstrates the nation’s supply (exports) and demand (imports) offers.

Participants of the Foreign Exchange Market are Individuals, Firms,Traders Investors, Commercial banks, Speculators, Arbitrators and Central Bank.The correct answer is "D".

David Hume constructed what has become known as the specie-flow theory of the movement of money and goods between nations to assure equilibrium among international prices and the distribution of specie (or commodity) money among countries that are trading with each other.

The first stage is called new-product stage in which the product is produced and consumed only in the innovating country with skilled labor and high technology. The second stage is the product-growth stage, which is at the XV time frame. The third stage is product-maturity stage, which falls in the VY time frame. The fourth stage is product-standardization stage, which coincides with the YZ time frame. The fifth and the last stage is the product-decline stage, which refers to the time frame starting with Z.

The first stage is called new-product stage in which the product is produced and consumed only in the innovating country with skilled labor and high technology. The second stage is the product-growth stage. In this stage, production is increased in order to meet the rapidly increasing demand. In the product-growth stage, imitating country starts to demand the new product. The third stage is product-maturity stage. In this stage, the new product is standardized and the innovating country may give license to the imitating country to produce the product introduced by itself. The fourth stage is product-standardization stage. In this stage, the new product is standardized. It is produced with lower costs of production in the imitating country and does no longer requires high technology within the production. The fifth and the last stage is the product-decline stage. In the fifth stage, the production of the new product within the innovating country decreases rapidly since the imitating country undersells it in its domestic market.

The idea of absolute advantage is generally attributed to Adam Smith, while “the principle of comparative advantage”, is generally attributed to David Ricardo in his 1817 “Principles of Political Economy and Taxation”.

The discipline of international economics deals with the decisions of nations that
act as individuals. The decisions on international transactions not only affect employment, income distribution, prices, economic development, growth, and welfare of the national economy but also the world economy as a whole. This interaction between a national economy and world economy justifies the importance of the discipline of international economics on its own.   Doğru yanıt " C " dir.

Firms in the imperfect competition can be price setters.

In the international trade analysis, production possibilities frontier (PPF) represents the total supply of the trading country while total demand is exhibited by the indifference curve (I).