If the demand for a country’s exports is price-elastic, and its government then introduces export subsidies, what impact will this have on the balance of trade and on the terms of trade?
- Abalance of trade: increase; terms of trade: increase
- Bbalance of trade: increase; terms of trade: decrease
- Cbalance of trade: decrease; terms of trade: increase
- Dbalance of trade: decrease; terms of trade: decrease