kelly20_00 wrote: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 stand 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 treade 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 is A.

My quesiton are:

1) I don't understand the underline sentence of the question. Why standards of living will rise when trade deficit increases? And why country's standard of living will decline when trade is balanced?

2) Why the answer is A?

Many many thanks!

kelly20_00 wrote:Lance123,

Thanks for your explanation, but I have a question from another point of view.

Am I right to say that, when there is a trade deficit in a country, unemployment rate of the country will be increased (especially for the low-skilled labour who can't find a job in manufacturing industry). If this relationship is ture, unemployed people may find it harder to buy any goods no matter the goods are from import or export. In this situation, how can we say that the living standard of the general citizens increase?


Thanks!