With other things unchanged, a rise in the average price of imports or a
Fall in the average price of exports will:
A)improve the terms of trade.
B)worsen the terms of trade.
C)expand the production possibilities frontier.
D)contract the production possibilities frontier.

Question

Quizplus · Accepted Answer

A rise in the average price of imports or a fall in the average price of exports both indicate a decrease in the relative value of a country's exports compared to its imports. This leads to a worsening of the terms of trade, as a country will have to export more goods or services to import the same amount as before.

With Other Things Unchanged, a Rise in the Average Price