Lets analyze the options... and run the POE..
Option B says "balance its trade while its standard of living falls". Now balancing of trade automatically happens when there is a decline in a country's standard of living ( refer to the last sentence of the stimulus)
So the country does not have to anything.

Option C says " increase trade deficits while its standard of living rises". Now " standards of living can rise because of growing trade deficits" . So again the country does not have to do anything.

Option D says " decrease trade deficits while its standard of living falls". Now may be this also happens automatically and the country does not have to do anything because " standards of living can rise because of growing trade deficits" and " standards of living can decrease because of decreasing trade deficits".

Option E talks about keeping standard of living constant which will help the country to be competitive as the country needs "a rising standard of living" and "balanced trade" and not constant "standard of living". So option E is not correct.

Answer: A