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
balance its trade while its standard of living rises
balance its trade while its standard of living falls
increase trade deficits while its standard of living rises
decrease trade deficits while its standard of living falls
keep its standard of living constant while trade deficits rise