Suppose That Country I's Income Elasticity of Demand for Imports

question 2

Multiple Choice

Suppose that country I's income elasticity of demand for imports (YEM) is 0.8. This YEM means that, as country I's national income rises, the "overall" or "net" effect of its growth on its trade sector is an __________ overall or net effect. In the context of the offer curve diagram, if country I is a "large" country and it grows (and assuming no growth occurs in its trading partner) , this type of net effect means that country I's terms of trade, other things equal, will __________.

• A) ultra-antitrade; improve (rise)
• B) ultra-antitrade; deteriorate (fall)
• C) antitrade; improve (rise)
• D) antitrade; deteriorate (fall)

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Definitions:

Conceptualizing The Future

The process of envisioning and planning for future trends, changes, and developments in an industry or society.

Myopia

Short-sightedness in planning and decision-making, where immediate benefits are prioritized over long-term gains.

Behavioral Economics

studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and resource allocation.