CFA Practice Question

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CFA Practice Question

International trade will ______

I. drive prices up in exporting countries.
II. drive prices down in importing countries.
III. equalize foreign and domestic prices.
Correct Answer: I, II and III

Trade will equalize international price differences by driving down prices with imports and driving prices up through exports.

User Contributed Comments 6

User Comment
cp24 how does int't trade drive prices up in exporting countries? pls help
Masterkang Export - Less Supply of the good in the exporting country - higher prices
eb2568 here is my take: remember that the exporter has a comparative advantage in that good, i.e. is cheaper than for the foreign country. as trade takes place, that price will rise while the import good (which is expenseive for the domestic country) will fall. thus, the rising and falling of those prices will, as C states, equalize prices.
jonan203 countries import what they "dumb" at making to buy said item cheaper, driving prices down

countries export what they are "sexy" at making to sell for higher profits, driving prices up

imports - "dumb it down"
exports - "sex it up"
schweitzdm @jonan203 excellent explanation
Inaganti6 if you understand how commodities are arbitraged by traders it should be easy as pie to understand.... i guess not all CFA candidates are business enthusiasts and read business news
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