A country's terms of trade is:
A) its bargaining power in international agreements.
B) the price of its exports relative to its imports.
C) the price of its imports relative to its exports.
D) the price of a good in autarky compared with the same good under free trade.

Question

Quizplus · Accepted Answer

Terms of trade refers to the ratio between the prices of a country's exports and imports. If a country's terms of trade improve, it means that the prices of its exports have gone up relative to its imports, allowing it to buy more imports for the same amount of exports. Conversely, if the terms of trade worsen, the country will have to export more goods to afford the same amount of imports. Therefore, choice B is correct.

A Country's Terms of Trade Is