CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Equilibrium in international trade occurs where the ______

A. total (domestic plus import) demand curve intersects the total (domestic plus import) supply curve.
B. import demand curve intersects the total (domestic plus export) supply curve.
C. import supply curve intersects the export demand curve.
Correct Answer: B

User Contributed Comments 7

User Comment
6210 why not A?
jerylewis demand (import) meets supply (domestic + export)
tany "with free international trade, the price (terms of trade) is determined where the export supply curve intersects the import demand curve"(quote from CFA readings)
aravinda I am not sure if my understanding of this practically is correct...I think if a country A needs to supply 100,000 units of food every day to support its consumption...but due to the comparative advantage, lets say Country A now produce only 80,000 units of food ...and in turn it produces more of clothing and exports them. But note that country A needs the remaining 20,000 units of food which it will import (demand for 20,000 units of food in the international market) so that there is equilibrium between the demand-supply of food in Country A...I think this is why " the import demand curve intersects the (domestic + export) supply curve
StJohnDale Not sure I understand this question?
jonan203 read it carefully

A: domesic plus import demand curve, implies domestic demand curve PLUS import demand curve

you cannot add domestic demand to import demand which is why choice A is incorrect for this particular question
tq99999 good explanation Tany thank u
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