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

Question

Quizplus · Accepted Answer

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

Suppose That a Country Experiences Growth Strongly Biased Toward Its