Suppose That Country I's Income Elasticity of Demand for Imports

Multiple Choice

Suppose that country I's income elasticity of demand for imports (YEM) is 0.8. This YEM means that, as country I's national income rises, the "overall" or "net" effect of its growth on its trade sector is an __________ overall or net effect. In the context of the offer curve diagram, if country I is a "large" country and it grows (and assuming no growth occurs in its trading partner) , this type of net effect means that country I's terms of trade, other things equal, will __________.

A) ultra-antitrade; improve (rise)
B) ultra-antitrade; deteriorate (fall)
C) antitrade; improve (rise)
D) antitrade; deteriorate (fall)