Final answer:
International trade is primarily affected by relative price differentials among nations, while foreign direct investment and portfolio investment involve currency exchanges. The correct answer is B. International Trade.
Step-by-step explanation:
International trade occurs primarily because of relative price differentials among nations. Factors affecting trade include the cost advantages or the specialization of countries in the production of certain goods.
Unlike international trade, both foreign direct investment (FDI) and portfolio investment involve the exchange of domestic currency for a foreign currency. In FDI, the investor buys more than ten percent of a company and often has a long-term focus, including some managerial input. Portfolio investment typically involves buying less than ten percent of a company and is focused on short-term gains, allowing for more rapid entry and exit of capital in an economy.
Therefore, the correct answer is B. International Trade. Portfolio investments can be liquidated quickly, often with a simple phone call or online transaction. In contrast, FDI requires more planning and is a lengthier process when buying or selling a company. These investment types play critical roles in currency demand and supply but are fundamentally different from international trade, which is directly influenced by varying prices across countries.