An improvement of a country's terms of trade caused by a change in domestic conditions always improves a country's overall welfare

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An improvement in a country's terms of trade does not always improve its overall welfare. While better terms of trade mean that a country can buy more imports for a given amount of exports, the overall effect on welfare also depends on factors such as the distribution of gains within the country, the impact on domestic producers and consumers, and potential retaliatory actions by trade partners.

An Improvement of a Country's Terms of Trade Caused by a Change