PRC-3 · Chapter 20 · Question 26 of 30
The 'Terms of Trade' is a crucial economic index calculated by dividing the Index of Export Prices by the Index of Import Prices. If this ratio improves, it means:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The country can buy more imports for a given quantity of exports
Explanation
Favorable (improving) terms of trade mean export prices rise relative to import prices, allowing the country to purchase a larger volume of imports with the same volume of exports.
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