The interest parity condition states that the domestic interest rate is equal to the
total of foreign interest rate and to the expected rate of change in the foreign exchange rate

PPP Theory, domestic price level will be equal to the product of the exchange rate and the level of foreign price level. If we accept that the domestic country is Turkey and the foreign country is the USA, the general price level in Turkey (PTR) equals to the product of $/₺ (E$) and foreign price level (PUS):

PTR=E $×PUS

See figure 8.3 Worldwide Foreign Direct Investments (% of World GDP) on page 213

The value of a domestic currency against foreign currencies corrected for the purchasing power is called the real foreign exchange rate. Therefore, the correct option is C.

International Cartels: An international cartel is an arrangement to avoid some or all forms of competition, the parties to which are business enterprise domiciled under more than one government and trading across national frontiers.

To calculate the forward exchange rate for $/ Tparity, we need spot rates that can be obtained from the banks’ quotations. Quotation is the price offer of a bank related to a financial asset. Therefore, the correct option is A.

the worldwide economic recession of 2008 was induced by the financial crisis of 2007 (also known as subprime mortgage crisis) in the USA and it is generally accepted by the researchers that it is the deepest economic recession in the world after the Great Depression of 30s.

Defining the key terms and concepts has to start with the term volume of trade. Volume of trade gives the total amount of imports and exports. Imports are the goods or services that are bought from a foreign country while exports refer to the goods or services that are sold to a foreign country. Thus, balance of trade gives the difference between total imports and total exports. If total imports are more than the total exports within an economy, then there is a trade deficit. On the other hand, when total exports exceed total imports, it means that there is a trade surplus. Therefore, the correct option is A.

Funds used for investments made by a country’s own citizens in a foreign country are called as domestic capital while the funds used for foreign investments in a country are foreign capital. In the first case, there is a capital outflow from country to abroad while there is an inflow of capital from abroad to the country in the latter case. Therefore, the correct option is E.

Foreign direct investments are the investments made by individuals or firms through buying a firm, providing the establishment capital for a new company or increasing the capital of an existing company in other countries. Such investments also involve transferring the technology, bringing the business knowledge and undertaking the investor to control over the company. Therefore, the correct option is E.

The law of one price: It states that entirely homogeneous (identical) goods should be sold with the same price even in different markets.

Embargoes are one of the strictest kinds of restriction among all non-tariff restrictions. In the embargo, trade is restricted in two ways: entry of products from a country and the sale of products to that country. The embargo may be implemented only for the trade of certain products, or for any trade relations with a country. This practice is sometimes preferred for non- economic reasons, in other words, political reasons.

Dumping: Dumping is a sale of goods abroad at low a price, below their cost and price in the home market.

The international capital movements or flows are defined as movements or flows of financial resources from one country to others to eliminate the disequilibrium in the balance of payments or to improve the country’s production possibilities. The correct answer is C.

Protectionism simply denotes the defensive measures of a government in order to protect its local industries from overseas competition.

If we know the spot market values of interest rate for both currencies and exchange rate, it is possible to calculate the expected exchange rate or, more accurately, the forward exchange rate.

In macroeconomics, these factors include the real GDP, relative productivity, relative price level, barriers for international trade (like tariffs and quotas) and preferences between imported and domestically produced goods. The correct answer is " C ".

Today’s multilateral trading system is constructed upon the GATT. The GATT was agreed on by the signatory member countries in 1947 and has paved the way for the WTO. However, the GATT has been maintaining its entity under the WTO. It is still the main agreement on multinational commodity trade with its widened scope. During the Uruguay Round in which the member countries decided to establish the WTO, they also renewed the GATT. Thus, the GATT improved along with the addition of new articles is referred as the GATT 1994 while the initial one signed in 1947 is referred as the GATT 1947. Upon the failure of the ITO initiative, the GATT 1947 constituted the main nominator of establishing a strong and responsive multilateral trading system. It took concrete steps on making the multilateral trade freer via numerous negotiation rounds.

The GATT is not terminated upon the establishment of the WTO. It is still functioning as the main agreement on the multinational commodity trade under the auspices of the WTO and referred as GATT 1994.

As also understood from the information given, all of the statements in the options about The Gatt are correct, so the correct answer is E.

The Classical Trade Theory or simply the Ricardian Model assumes that comparative advantage of the countries solely depends on the relative differences in the productivity of labor. Nevertheless, it does not explain the reason of these productivity differences. In other words, the Ricardian Model does not clarify the basis of the comparative advantage. Heckscher-Ohlin Theory was developed so as to respond to two questions that had not been answered by the Classical Trade Theory: (1) What is the determinant of the comparative advantage of the countries? (2) How does international trade affect the earnings of the factors of production within the trading countries?

Purchasing Power Parity (PPP) Theory is based on a principle known as “law of one price”. This law claims that the entirely homogeneous (identical) goods should be sold with the same price even in different markets. Therefore, the correct option is E.