As we already noted long term capital movements may be classified as direct investments (also called as foreign direct investments and known by the abbreviation FDI) and portfolio investments (also called as foreign portfolio investments and known by the abbreviation FPI).

The multilateral trading system that is represented by the WTO is based on agreements. The WTO agreements are the outcomes of negotiations. Today’s WTO agreements are largely depend on the conclusions of the Uruguay Round.

The structure of the WTO is based on five pillars:

• The first pillar, trade in commodities, has been the founding framework of the multilateral trading system. As explained before, the GATT signed in 1947 has been the fundamental basis of the multilateral trading system in commodities. Then, the GATT 1947 was revisited at the Uruguay Round and referred as the GATT 1994. However, some commodities require specific regulations. Thus, they are configurated by separate agreements and annexes under the GATT 1994.
• Trade in services, which is the second pillar of the structure of the WTO, was not a subject of the GATT 1947. It is regulated by the GATS (General Agreement on Services Trade) within the structure of the WTO. The agreements and annexes under the auspices of the GATS are on movement of natural persons, shipping, telecommonication, air transport and financial services. Like in the GATT 1994, they constitute the integral part of the GATS.
• Third pillar of the structure of the WTO is the TRIPS (Trade Related Aspects of Intellectual Property Rights). It is the most comprehensive agreement on intellectual property rights. TRIPS covers: (1) copyright and related rights such as performers’ rights, producers of recordings and broadcasting set ups, (2) trademarks, (3) geographical indications, (4) industrial designs, (5) patents, (6) layoutdesigns of integrated circuits, (7) undisclosed information (WTO, 2019c). Intellectual property rights had not been dealt with the GATT 1947. It is the TRIPS that has regulated the intellectual property rights for the first time at the multilateral level.
• Fourth pillar of the structure of the WTO is the Trade Related Dispute Settlement. It usually refers to one of the most important innovations of the Uruguay Round. However, we should avoid a misunderstanding: Stating the Trade Related Dispute Settlement as one of the most important innovations of the Uruguay Round, we do not mean that it is a newly starting system. Conversely, there was a dispute settlement mechanism with the GATT 1947, based on Article XXII and Article XXIII of the GATT 1947. Nevertheless, the structural weaknesses due to the inherent circumstances led to an increased number of unresolved trade problems among the GATT 1947 countries. Thus, the GATT 1947 countries had to improve the dispute settlement mechanism at the Uruguay Round.
• The fifth and the last pillar of the structure of the WTO is the Trade Monitoring. Trade Monitoring is achieved by the Trade Policy Review Mechanism. The aim of the Trade Policy Review Mechanism is to assist efficient adherence of all the WTO member countries to the rules and procedures of the WTO as a whole. The main function of the Trade Policy Review Mechanism is to evaluate the effects of the trade policy implementations of the WTO member countries on the multilateral trading system. It also leads to a greater transparency within the trade policies of the WTO member countries.

As also understood from the information given, the correct answer is E. The structure of the WTO is based on five pillars.

Although the WTO is the perpetuation of the GATT aiming to reach common multilateral goals, it has its own fundamentals that are mostly the improved versions of the GATT system. The fundamentals of the WTO can briefly be examined under four subtitles:

• Setting multilateral trading rules: There is no doubt that multilateral trading rules ensure assurance, transparency and economic stability. Consumers as well as producers enjoy the confidency of supplies and the vast variety of manufactured commodities, inputs and raw materials. The traders know that the markets are open to them with uniform trading implementations. Such a system that functions on the grounds of multilateral trading rules conceives a more accountable world economy. Multilateral trading rules are taken by consensus among all the WTO member countries and ratified by their parliaments. Thus, a multilateral trading rule cannot be implemented if a member country does not give assent. The driving forces of the multilateral trading system are the agreements negotiated and signed by the WTO member countries and ratified by their national parliaments. These agreements constitute the legal basis of the multilateral trading system.
• Trade negotiations: In setting the multilateral trading rules, trade negotiations have been the main instrument of the system since the signing of the GATT in 1947. The basis of today’s multilateral trading system has been laid down by a series of trade negotiations, or as sometimes referred as, trade rounds.
• WTO agreements: The multilateral trading system that is represented by the WTO is based on the agreements. In other words, multilateral trading rules get their binding from the WTO agreements. In this respect, the WTO agreements constitute the structure of the WTO. Since they require an explicit explanation, they are examined under the following title of the Structure of the WTO.
• Building trade capacity: Among the total 164 WTO member countries, over threequarters are developing or least developed countries. The WTO agreements entail special provisions for developing or least developed countries by taking into consideration their economic structures and needs. These special provisions mostly offer longer time frames in implementing the WTO commitments, facilitating their trading opportunities, assisting and giving them support in building trade infrastructure in order to take more part within the world trade.

As also understood from the information given, the correct answer is E. All of the subtitles in the options are the fundamentals of the WTO.

Tariff Quotas: A tariff quota allows the import of a certain amount of a commodity duty-free or at a lower duty rate while amounts exceeding the quota are subject to a higher duty rate

Most of the countries promote to attract direct investments since they have some important positive effects on the balance of payments, capital accumulation, economic growth, and employment. The correct answer is D.

Spot exchange rate: It is the current exchange rate today for immediate delivery.

Price increases in two countries, barriers to free trade, preferences between imported and domestically produced goods and relative productivity affect the demand and supply of foreign exchange and cause a change in the equilibrium level of foreign exchange rate. Therefore, the correct option is C.

The foreign exchange market is not a marketplace where the suppliers and the consumers meet. Thus, a foreign exchange market is different from a commodity market in this respect. The participants of tshe foreign exchange market are individuals, firms, traders, investors, commercial banks, speculators, arbitrators, and the Central Bank of countries, which can be thousands in numbers. Therefore, the correct option is A.

Vienna Congress was the first initiative to construct a system of peace. Therefore, the correct choice is B.

Since the current exchange rate is $/₺= 5.53 and you used 12$ to buy, this T-shirt costs you in terms of Turkish lira:

12$ x 5.53$/₺ = 66.33₺

Real foreign exchange rate: The value of a domestic currency against foreign currencies corrected for the purchasing power is called the real foreign exchange rate

World Trade Organization (WTO).

Natural Advantage; A country’s advantage to other countries due to its climate, natural resources and labor ability. Ex.; Brazil-Coffee, Saudi Arabia-Petroleum, Turkey-Hazelnut

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. Such a cartel may include the major enterprises which operate in a given industrial field throughout the world.

Foreign exchange rate: In order to buy a unit of currency, the amount that must be foregone in the other currency is the foreign exchange rate. In other words, the foreign exchange rate is the price of one unit of currency in terms of the other. The correct answer is " A ".

Thomas Mun: He was one of the first mercantilists. In other words, he believed that a nation’s holdings of gold are the main measure of its wealth and that governments should regulate trade to produce an excess of exports over imports in order to gain more gold for the country. Later economists, from Adam Smith on, showed that trade is self regulating and that governments seeking to hoard gold or other hard currencies will make their countries worse off.

The Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services (in this case, a burger) in any two countries. Therefore, the correct option is E.

The tariff concessions deal was signed on 30 October 1947 by twenty-three countries and it came into effect by 30 June 1948 via the Protocol of Provisional Application. Therefore, the correct choice is E.

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. The correct answer is " B ".

According to Linder, firms within a country produce commodities for the domestic market, and they are motivated to produce more when the market is enlarged. Thus, it is the domestic market that determines the commodities in which the country specializes.