Foreıgn Trade

Yanıt Açıklaması: Theory of economic integration analyzes the economic effects of economic integrations. Theory of economic integration is developed upon the welfare effects of customs union. The welfare effects of customs union are introduced by Jacop Viner in 1950. In his book The Customs Union Issue, Viner examines the static effects of customs union. Static effects are the effects that occur at the time of establishment of the customs union. Static effects of customs union are called trade creation and trade diversion. Static effects of customs union They emanate at the formation of the customs union. Thus, they represent very short run effects. The static effects of customs union take into consideration only the welfare within the highest cost country. The static effects of customs union are sometimes referred as Vinerian customs union theory. Next to the static effects, there are also dynamic effects of customs union. Dynamic effects are long run effects. They arise due to increased competition within the customs union, higher level of technology, economies of scale, induce to foreign direct investments and better allocation of economic resources. Let’s give brief information about these dynamic effects: Increased competition: Before the establishment of customs union, producers may enjoy the protection behind trade restrictions. Along with the establishment of customs union, trade restrictions among the member countries are abolished. Thus, producers have to be more efficient so as to compete with the identical commodities of the other member countries. Due to the increased competition, costs of production will be decreased, leading to a decrease in prices. Consumers will enjoy the lower prices that were the outcomes of increased competition. Higher level of technology: Increased competition will lead to seeking higher level of technology. Since producers would like to rise efficiency in order to meet the increased competition, they would demand higher level of technology within their production. Thus, customs union would stimulate the improvement and utilization of new technologies. At the end, consumers will be better off with decreased prices. Economies of scale: It may result from the enlarged market effect of customs union. A country entering a customs union will begin to produce for the customs union market that is larger than its domestic market. Increased amount of production will lead to economies of scale that will lower the costs and also prices. Like in the previous dynamic effects, consumers will be better off from the economies of scale. Induce to foreign direct investments: Enlarged market that is formed along with the customs union may attract the attention of potential investors. Investors who would like to meet the advantages of increased competition and economies of scale will invest within the customs union member countries. Increased foreign direct investments will also help the adjustment of balance of payments deficits of the member countries, if any. Better allocation of economic resources: In a customs union, member countries produce the commodities or services in which they have a comparative advantage. Specialization that arises from comparative advantage will lead to better allocation of economic resources. Not only the member countries but also the world will be better off with adequate allocation of limited economic resources. As also understood from the information given, the correct answer is E. The dynamic effects of customs union are increased competition within the customs union, higher level of technology, economies of scale, induce to foreign direct investments and better allocation of economic resources.

Yanıt Açıklaması: Transports costs, logistic costs and border crossing costs are the costs of delivering the goods from producers to consumers.

Yanıt Açıklaması: The Central Bank of the Republic of Turkey (CBRT) monthly publishes the real effective exchange rate on its internet site via Electronic Data Delivery System

Yanıt Açıklaması: Where do above mentioned effects of the short term capital flows come from? These effects vary with some characteristics of the country to which short term capital flows move: exchange rate regime in the country, interest rate differential between the country and foreign countries, size of the balance of payments deficit. Since the size of these effects depends on the monetary policy followed in the country (the degree of sterilization), without technical details, we can conclude that short term capital flows affect the quantity of money, interest rate (therefore foreign exchange rate) and general price level in the country . Therefore, the correct option is C.

Yanıt Açıklaması: 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.

Yanıt Açıklaması: World Bank is a group composed of five associated institutions. These are; The  International Bank for Reconstruction and Development, The International Development Association, The International Finance Cooperation, The Multilateral Investment Guarantee Agency and The International Center for Settlement of Investment Disputes. Therefore, the correct choice is D.

Yanıt Açıklaması: Real Fx Rate = Nominal FX Rate x ForeignPrice DomesticPrice

Yanıt Açıklaması: Current Account: This account involves all credit and debit items arising from export and import transactions of all goods and services, income receipt, and payment transactions in the country. If we add up all items related to goods and services export and import, we obtain the trade balance which is an important component of current account. Therefore, the correct option is C.

Yanıt Açıklaması: A tariff surges the price of the imported products, sometimes uplifting its status to that of a luxury product. Therefore, a tariff could be imposed on certain imported products to make sure that only a few people have an enough supply for those imports. The more expensive an imported product becomes, the fewer people can afford to buy it. Thus, a tariff may be used to ensure or maintain the status of a luxury product.

Yanıt Açıklaması: 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. On the other hand, an import quota limits import absolutely. If the quantity imported under a quota is less than what would be imported in the absence of a quota, the question about local price of the product may come up.

Yanıt Açıklaması: Reserve Assets: As long as the credit usage from the International Monetary Fund (IMF) is zero, international reserve assets consists mainly of the changes in official reserves of the country. Therefore, the correct option is A.

Yanıt Açıklaması: In a perfectly competitive market or simply in perfect competition, 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. As there are no restrictions imposed, it’s easy for the new firms to enter into the market and for the existing firms to exit out from the market. The participants of the market, the firms and the consumers are well-informed about the prices and the facts related with the market.

Yanıt Açıklaması: During the Uruguay Round in which the member countries decided to establish the WTO, they also renewed the GATT. Therefore, the correct choice is C.

Yanıt Açıklaması: When a country can gain by imposing a tariff, we might ask what the best possible tariff level is. This is known as the optimal tariff issue. Conventionally, the term “optimal tariff” refers to the tariff justified by the terms of trade argument. The terms of trade argument for tariffs is based on the assumption that countries are large enough to influence the world relative prices of their imports and exports.

Yanıt Açıklaması: Generally, domestic manufacturers competing in opposition to imports will get advantage from a tariff. If a government places a tax on imports of a product, the domestic price of the imported product will increase.One of the important benefits of tariffs is that they act as the revenue of government. The effects of a tariff on the well-being of consumers and producers do not exhaust its effects on the importing country. Imposing a tariff with an optimal basis on exporting countries brings revenue to the country’s government.

Yanıt Açıklaması: The last factor changing the equilibrium exchange rate in the interest rate parity approach is the changes in domestic interest rate (iT) paid for Turkish lira assets. The correct answer is " A " .

Yanıt Açıklaması: 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

Yanıt Açıklaması: Specific Limitations on Trade is described by the measures like quotas, import licensing requirements, proportion restrictions of foreign to domestic goods, minimum import price limits, embargoes. Customs and Administrative Entry Procedures is described by the measures like Valuation systems, anti-dumping practices, tariff classifications, documentation requirements, fees.  Standards is described by the measures like Standard disparities, intergovernmental acceptances of testing methods and standards, packaging, labelling, and marking. Government Participation in Trade is described by the measures like Government procurement policies, export subsidies, countervailing duties, domestic assistance programs.  Charges on imports is described by the measures like Prior import deposit subsidies, administrative fees, special supplementary duties, import credit discrimination, variable levies, border taxes.

Yanıt Açıklaması: The account that involves all credit and debit items arising from export and import transactions of all goods and services, income receipt, and payment transactions in the country is the current account. The correct answer is A.

Yanıt Açıklaması: The disadvantage of tariff is that it impedes with the concept of ‘free trade’ because it mainly focuses on the protection local industries. Free trade permits the market to set prices on the basis of supply, demand, productivity, and logistics, simply put, market determines the price. The remaining items are the advantages of a tariff.