Bản Tin Sớmwww.bantinsom.com
CFA Level I - Study Session 6
“Gaining from International Trade”
The candidate should be able to:
the conditions under which a nation can gain from international trade;
Nations can gain from trade if they produce goods in which they have a comparativeadvantage and trade for goods in which they have a comparative disadvantage.
Comparative Advantage is the ability to produce a good at a lower opportunity costthan others can produce it.
As long as the relative costs of production differ across nations, gains fromspecialization and trade will be possible.When nations produce and trade based on Comparative Advantage trade between nationsleads to an expansion in total world output and mutual gains to each nation.
the effects of international trade on domestic supply and demand;
When product can be transported long distances at low cost (relative to its value) thendomestic price of the product is determined by world demand and supplyTrade & specialization thus results in:1.Lower prices and higher domestic consumption for imported products.
Domestic Consumers benefit from trade2.Higher prices and higher domestic production for exported goods.
Domestic Producers benefit from trade.
commonly used trade-restricting devices including tariffs, quotas, voluntary exportrestraints, and exchange-rate controls;
Commonly used trade-restricting policies are:
– are a tax on goods and services imported into the country.
– puts an upper limit on the amount of a good or service that isallowed to be imported into the country.
Voluntary Export Restriction (VER)
– an agreement by foreign firms to limit theamount of a good or service they will export into the country
Exchange Rate Controls
– when the government either sets the exchange rate at arate above the market rate or it limits the access to foreign currency by its citizens.Effect is to make imports into the country more expensive and reduce trade.
the impact of trade barriers on the domestic economy and
who benefits andloses from the imposition of a tariff;