İKTİSADA GİRİŞ II

Autarky is the absence of international trade. At the autarky, production and consumption points are the same and they are both on the production possibilities frontier. The correct option is E.

It is acknowledged that economics as a science is born with the publication of the famous book of Adam Smith in 1776, entitled The Wealth of Nations. The correct option is C.

According to the theory of comparative advantage, even if one country is less efficient than the other country in the production of both commodities, there is still a basis for mutually beneficial trade. e absolute disadvantaged country should specialize in the production of the commodity in which its absolute disadvantage is smaller (it is the commodity of its comparative advantage) and export its surplus to the other country then, import the commodity in which its absolute disadvantage is greater (it is the commodity of its comparative disadvantage). The correct option is A.

The standard theory of international trade does not explain the reason for the differences in the relative commodity prices in autarky. is the weakness of the standard theory is accomplished by the Heckscher-Ohlin theory. e Heckscher-Ohlin theory explains the reason for the differences in the relative commodity prices in autarky by using the factor intensity and factor abundance. The correct option is B.

Perfect competition is a market in which there are many firms each selling an identical commodity; there are many buyers; there are no restrictions on entry into and exit from the industry; firms in the industry have no advantage over potential new entrants; firms and buyers are well informed about the price of the commodity that each firm is produced. The correct option is C.

Traditional trade restriction aims refer to protecting domestic producers and collecting revenue to the treasury. The correct option is E.

The real exchange rate is the nominal exchange rate weighted by the consumer price index of the two countries. The correct option is B.

The balance of payments has two main accounts namely the Current Account and Capital and Financial Account. These main accounts have various sub-accounts, and the other mentioned terms are the sub-accounts of these main two. The correct option is A.

Last but not least, international economic transactions affect the general equilibrium of an economy. The main aim of the economic policies is to attain the internal equilibrium and external equilibrium at the same time.

General equilibrium is determined by the implementation of two economic policies: (1) expenditure-changing policies, (2) expenditure-switching policies.

Expenditure-switching policies are the policies which change the total expenditure in the expense of imports or domestic commodities. The instruments of the expenditure-switching policies are the trade restrictions, foreign exchange controls, devaluations and revaluations.

The terms of trade of a country are defined as the ratio of the price of its export commodity to the price of its import commodity. In a realistic world of many traded commodities, the terms of trade of a country are given by the ratio of the price index of its exports to the price index of its imports. The ratio is usually multiplied by hundred in order to express the terms of trade in percentages.