If a home country is exporting corn and importing bikes and if the relative price P_c/P_b is increasing, then: A) the home country will export less corn. B) the home country will export more corn. C) the home country will import the same number of bikes. D) there is no change in the trade pattern for the home country.

Question

Quizplus · Accepted Answer

The relative price increase suggests that the price of corn (the export) relative to bikes (the import) is increasing. This means corn is becoming relatively more expensive or valuable on the international market, incentivizing the home country to export more corn to capitalize on the higher prices.

If a Home Country Is Exporting Corn and Importing Bikes