PRC-3 · Chapter 20 · Question 9 of 30
A nation calculates a crucial index by dividing its Export Price Index by its Import Price Index. If this ratio improves, the country can buy more imports for a given quantity of exports. This ratio is the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Terms of Trade
Explanation
The Terms of Trade measure the purchasing power of a nation's exports relative to its imports (Index of Export Prices / Index of Import Prices).
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