Question

a. what is the main factor that led to the rise in international trade over recent decades?

the increase in global production

significant reductions in the cost of international transport and communication

more trade discussions at the world trade organization

b. what is the main factor that led to an increase in global financial flows?

the removal of capital controls

that institutional investors began investing overseas to reduce portfolio diversification

restrictions on foreign direct investment

Explanation:

a. The increase in global production led to more goods available for trade. Significant reductions in the cost of international transport and communication made it cheaper and faster to move goods and information across borders. This made international trade more feasible and profitable. More trade discussions at the World Trade Organization (which aims to liberalize trade) also contributed but the main factor among the options given is the cost - related one.
b. The removal of capital controls allows money to flow more freely across countries. When capital controls (like limits on how much money can be taken out of a country or invested abroad) are removed, investors (both institutional and individual) can more easily move their funds. Institutional investors began investing overseas to reduce portfolio diversification (by spreading risk across different markets). But the main factor for the increase in global financial flows is the removal of capital controls as it directly enables the movement of financial capital.

Answer:

a. the increase in global production: No; significant reductions in the cost of international transport and communication: Yes; more trade discussions at the World Trade Organization: No.
b. the removal of capital controls: Yes; that institutional investors began investing overseas to reduce portfolio diversification: No; restrictions on foreign direct investment: No.