Question

Neither a rising standard of living nor balanced trade, by itself, establishes a country's ability to compete in the international marketplace. Both are required simultaneously since standards of living can rise because of growing trade deficits and trade can be balanced by means of a decline in a country's standard of living.

If the facts stated in the passage above are true, a proper test of a country's ability to be competitive is its ability to

• A. balance its trade while its standard of living rises
• B. balance its trade while its standard of living falls
• C. increase trade deficits while its standard of living rises
• D. decrease trade deficits while its standard of living falls
• E. keep its standard of living constant while trade deficits rise

Answer 1

The correct option is A balance its trade while its standard of living rises

Only A supports the objective - that is remain competitive.
The key is to make sure that Trade deficit is balanced or less when standard of living increases.