Suppose that a country experiences growth strongly biased toward its export,cloth,
A)this will increase the price of cloth relative to the imported good.
B)this will tend to worsen the country's terms of trade.
C)this will tend to improve the country's terms of trade.
D)this will tend to leave the country's terms of trade unchanged.
E)this will tend to worsen the terms of trade for the country's trading partner.

Question

Quizplus · Accepted Answer

When a country experiences growth biased toward its export, the increased supply of the export good (cloth) can lead to a decrease in its price relative to imported goods, worsening the country's terms of trade.

Suppose That a Country Experiences Growth Strongly Biased Toward Its