An increase in tastes of the import commodity of Nation A and export in B:

Question

Quizplus · Accepted Answer

An increase in the tastes of Nation A's import commodity implies that Nation A will demand more of this product from Nation B. As a result, Nation A will need to trade more of their own goods (exports) in exchange for the import commodity. This means that Nation A will have to give up more of their own goods to acquire the same amount of the import commodity. Therefore, the terms of trade of Nation A will be reduced.

An Increase in Tastes of the Import Commodity of Nation