A developed country has a price-inelastic demand for oil and imports all of its oil. Oil-producing countries raise the supply of oil. What is likely to happen to the developed country’s inflation rate and balance of trade?
- Arate of inflation decreases; balance of trade improves
- Brate of inflation decreases; balance of trade worsens
- Crate of inflation increases; balance of trade improves
- Drate of inflation increases; balance of trade worsens