For the commodity terms of trade to improve, a country's export price index must rise relative to its import price index over a given time period.

Question

Quizplus · Accepted Answer

The statement is correct as an improvement in the terms of trade means that a country can get more imports for each unit of export it sells. This can happen if the export price index (the average price of a country's exports) increases relative to the import price index (the average price of a country's imports).

For the Commodity Terms of Trade to Improve, a Country's