- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 6. International Trade
- Subject 2. International Trade Restrictions and Agreements
CFA Practice Question
Which trade policy will have no impact on government revenue?
A. VER
B. Export subsidy
C. Import quota
Explanation: The VER allows the quota rent resulting from the decrease in trade to be captured by the exporter. For B, government revenue actually falls. For C, the result is mixed, as it depends on whether the quota rents are captured by the importing country through sale of licenses or by the exporters.
User Contributed Comments 5
User | Comment |
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SalimBouch | some one can explain? I didnt understand the explanation? |
timkalt | It is also possible to exclude b) and c) as an Export subsidy cost the gov money (less revenue) and an import quota brings money (even more harmful than tariff). Therefore, VER is the only possibility and also voluntary imposed by exporter. |
conorwalsh | Export subsidy is a cost... revenue remains the same no? |
nmech1984 | conorwalsh I considered the same. |
edrei7 | I think the question needs to clarify which government revenue is affected. Because in export subsidies, only the exporting country's government revenue is affected. |