Spot exchange rate: It is the current exchange rate today for immediate delivery. However, forward exchange rate is the exchange rate settled today for a payment or delivery that will be consummated in a future date. Therefore, the correct option is D.

we all know that a large part of international transactions consists of financial assets (like bonds, equities, deposits and loans), trade and currency exchange in a modern world.

The multilateral trading system is run by five basic principles. These are: Free Trade without Discrimination Principle, Predictability Principle, Promoting Fair Competition Principle, Freer Trade Principle and Encouraging Economic Development and Reform Principle. Therefore, the correct choice is B.

The GATT 1994 represents an umbrella agreement for the trade in commodities. The agreements and annexes under the auspices of the GATT 1994 are on agriculture, health regulations for farm products, pre-shipment inspection, textiles and clothing, rules of origin, safeguards, customs valuation methods, product standards, investment measures, import licensing, subsidies and counter measures and antidumping measures. Therefore, the correct choice is D.

One of the main aims of trade restrictions is to protect domestic producers. Actually, this aim is known as traditional aim of trade restrictions. Another
traditional aim of trade restrictions is to collect revenue to the Treasury. Adjust balance of payments: Trade restrictions are effective instruments to adjust the balance of payments. Serve for diplomatic relations: Countries can use trade restrictions as an instrument of diplomatic relations. The ccorrect answer is        " D ".

The PPP Theory points out an important fact: If the prices in the home country increase more than the prices in the foreign country, domestic currency must depreciate. On the contrary, if the prices in the foreign country increase more than the prices in the home country, domestic currency must appreciate.

A foreign exchange (or a foreign exchange rate) crisis occurs when there is an unexpected and sudden collapse of domestic currency unit (high level of depreciation in the flexible exchange rate regime or high level of devaluation in the fixed exchange rate regime). The correct answer is B.

There are three types of tariffs: specific, advalorem, and compound. Specific tariffs are measured in accordance with a physical unit of measurement, such as on a per-ton, per-bushel, or per-meter rate, and are specified at a particular monetary value. Ad-valorem tariffs are measured on the value of the goods and are levied as a percentage of that value. Finally, Compound tariffs are a combination of ad-valorem and specific.

The League of  Nations and the International Labor Organization are established in Geneva in 1919. This dates before the II. Wold War, therefore the correct choice is A.

Merchantalism- 1500-1600

Absolute Advantage- 1700-1800

Competitive Advantage-1800-1900

Factor Proportions Theory- 1900-2000

New Trade Theory-1900-2000

National Competitive Advantage-1900-2000 (Figure 2.5)

The basic functions of tariffs are to serve as a source of revenue, shield domestic industries, and to remedy trade distortions (as a sanction).

After shortly reviewing the conceptual issues about the foreign exchange rates, we want to express two important activities taking place in these markets: Speculation and arbitrage. Both of these activities are related to gain extra return benefiting from price differences. A speculation activity does this on the time dimension while an arbitrage activity does it on the place dimension. The correct answer is " C ".

We cannot definitely determine the comparative advantage of the trading countries by the Linder Model but instead, we can find out the pattern of trade. Linder Model is good at predicting the pattern of international trade.

INTRODUCTION

It is important to understand why trade takes place between countries. The five basic reasons why trade may take place are summarized below:

1. Differences in Technology: Advantageous trade can occur between countries if the countries differ in their technological abilities to produce goods and services. Technology refers to the techniques used to turn resources- labour, capital, land into outputs -goods and services.
2. Differences in Resource Endowments: Advantageous trade can occur between countries if the countries differ in their endowments of resources. Resource endowments refer to the skills and abilities of a country’s workforce, the natural resources available within its borders-minerals, farmland, etc., and the sophistication of its capital stock (machinery, infrastructure, communications systems).
3. Differences in Demand: Advantageous trade can occur between countries if demands or preferences differ between countries. Individuals in different countries may have different preferences or demands for various products. For example, the Indonesians are likely to demand more rice than Europeans, even if consumers face the same price. Turkish people may demand more yoghurt, the Dutch more beer, and the Japanese more seaweed than Indians would, even if they all faced the same prices.
4. Existence of Economies of Scale in Production: The existence of economies of scale in production is sufficient to generate advantageous trade between two countries. Economies of scale refer to a production process in which production costs fall as the scale of production rises.

5. Existence of Government Policies: Government tax and subsidy programs alter the prices charged for goods and services. These changes can be sufficient to generate advantages in production of certain products. In these circumstances, advantageous trade may arise solely due to differences in government policies across countries.

Ad-valorem tariff is a tariff rate charged as a percentage of the price. Under a system of ad-valorem tariffs, for example, an individual importing a $20,000 Volkswagen would have to pay a higher duty than a person importing a $19,900 Opel.

GATT Article II obligates members to impose tariff rates that are no higher than their bound rates. According to WTO, “Bound rate is the maximum rate of duty (tariff) that can be imposed by the importing country on an imported commodity. Here, each country commits itself to a ceiling on customs duties (tariff) on a certain number of products. These rates vary from country to country and commodity to commodity. But no country can raise duties above the bound rate it has committed, and the rate of customs duty actually applied may be lower than the bound rate.

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. If the domestic interest rate is higher than the foreign interest rate, this indicates an expected depreciation in the domestic currency. Therefore, the correct option is B.

See the  Chart 5.1 Groups of Non-Tariff Restrictions.