Answer:
Inflation rates increase
Explanation:
Considering the diagram in the question above, and the available answers, the correct answer is option A "Inflation rates increase."
This is based on the fact that when a country or internal inflation increases in comparison to its trading counterparts this will lead to an increase in that country's export prices compared to the rate at which its import prices increase. Hence, this leads to improvement in the trade balance for that particular country.
