If domestic and foreign prices rise by the same relative amount, what will happen to the trade balance?
A) It will rise.
B) Nothing will happen.
C) It will fall.
D) Not enough information is provided to answer the question.

Question

Quizplus · Accepted Answer

If both domestic and foreign prices rise by the same relative amount, there will be no change in the relative price of goods, so there will be no impact on the trade balance.

If Domestic and Foreign Prices Rise by the Same Relative