"If We Observe That a Home Country's Volume and Terms

Essay

"If we observe that a home country's volume and terms of trade are both movingin the same direction (i.e., either both increasing or both decreasing), then we can surmise that the home country's offer curve is shifting. However, if we observe that the home country's volume and terms of trade are moving in opposite directions (i.e., one is increasing and the other is decreasing), then we can surmise that the foreign offer curve is shifting." Is this statement correct or incorrect? Illustrate and explain your answer. (Assume "elastic" offer curves throughout.)