In a Two-Good,one-Period Model,an Increase in the Terms of Trade

question 49

Multiple Choice

In a two-good,one-period model,an increase in the terms of trade when Good a is initially imported is caused by

• A) the price of Good a falling relative to Good b.
• B) the price of Good a rising relative to Good b.
• C) the consumption of Good a rising.
• D) the production of Good b falling.
• E) a current account deficit occurring.

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