Advantages of International Trade | CFA® Level 1 Exam Preparation

Benefits of International Trade

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Question

When both exports and imports are considered, the major advantage of international trade is that it allows us to

Answers

A. share our technology and efficiency with less-developed countries that would otherwise never have the opportunity to observe modern goods and services.

B. sample foreign products that many of us would otherwise never see.

C. consume a larger, more diverse quantity of goods and services at lower prices than would otherwise prevail.

D. maintain jobs for workers who would otherwise have little to do.

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Explanations

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A. B. C. D.

In the absence of trade the consumption of each country is constrained by the country's production possibilities. Trade expands the consumption possibilities of both countries. Specialization and exchange permits two countries to expand their joint output and as a result, both countries can increase their consumption of both all goods.

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