PRC-3 · Chapter 20 · Question 3 of 30
A country calculates an index comparing the prices of the goods it exports against the prices of the goods it imports. This crucial ratio, which measures purchasing power in international trade, is called the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Terms of trade
Explanation
The 'Terms of Trade' is the ratio of an export price index to an import price index. An improvement means export prices are rising faster than import prices, buying more imports per unit of exports.
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