If the United States exports 6 million bushels of corn to Japan and thereby earns income with which it imports 3 million video recorders from Japan, the United States' terms of trade with Japan for corn and video recorders is 2:1.

Question

Quizplus · Accepted Answer

The terms of trade are calculated by dividing the price index of exports by the price index of imports. In this case, the United States exported 6 million bushels of corn and imported 3 million video recorders, so the exchange ratio is 2:1. Therefore, the terms of trade are 2:1.

If the United States Exports 6 Million Bushels of Corn