CFA Practice Question

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CFA Practice Question

The exchange rate responses to current account surpluses and deficits should eventually help eliminate the source of the initial current account imbalances. Which of the following factors will help accelerate the process?

I. Highly sensitive import prices to changes in the exchange rate.
II. Highly sensitive export prices to changes in the exchange rate.
III. High price elasticity of import demand.
IV. High price elasticity of export demand.
A. I and III
B. II and IV
C. All of them
Explanation: All of them will help restore a balanced current account.

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