A country sets import quotas. Imported goods are sold by suppliers at prices that clear the market. If demand for imports is price-inelastic, what effect will this have on the country’s balance of trade and on its terms of trade?
- Abalance of trade improves, terms of trade improve
- Bbalance of trade improves, terms of trade worsen
- Cbalance of trade worsens, terms of trade improve
- Dbalance of trade worsens, terms of trade worsen