Suppose that there is an improvement in a country's terms of trade between 2010 and 2014. This improvement means that:
A) the country can purchase more imports in 2014, with the same volume of exports as in 2010.
B) the country can purchase more exports in 2014, with the same volume of exports as in 2010.
C) the country needs to increase its exports in order to purchase the same volume of imports as in 2010.
D) regarding its international trade, the country is worse off in 2014 than it was in 2010.

Question

Quizplus · Accepted Answer

An improvement in a country's terms of trade means that the country can sell its exports at a higher price while paying a lower price for its imports. This means that the country can purchase more imports in 2014 with the same volume of exports as in 2010, which is option A. Therefore, the best choice is A.

Suppose That There Is an Improvement in a Country's Terms