Hello Ahmed,
The correct answer is 'A', as it involves end-to-end communication that is provided only with IP and higher protocols. It can not be PPP because the PPP is a link-layer protocol used only between directly connected devices. As hosts 1 and 2 are not directly connected, PPP can not be directly used between them.
With respect to the arrows in the exhibit, the arrow A is IP, the arrow C would be PPP and the arrow D would be T1. Interestingly, and perhaps this is deliberate, there is no switch-to-switch communication in this topology (actually, there is almost never a switch-to-switch communication between different networks), and hence, the arrow B does not have any meaning and should not be even present. Perhaps it is meant as a distractor.
Best regards,
Peter
