If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

Question

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When the world price of a product rises relative to the domestic price in a trading nation, it becomes cheaper for foreign buyers to purchase that product from the trading nation. As a result, the demand for that product from foreign buyers will increase, leading to an increase in exports. On the other hand, it becomes more expensive for domestic consumers to purchase that product, leading to a decrease in demand for that product in the domestic market. As a result, the domestic production of the product may decrease, leading to a decrease in imports. Therefore, exports will increase and imports will decrease.

If the World Price of a Product Rises Relative to the Domestic