GCEEconomicsInternational Trade2020

The terms of trade of a country improve when

Athe prices of its imports rise faster than the prices of its exports
Bthe index of its export prices rises relative to the index of its import pricesCORRECT
Cthe volume of its exports increases while import volume remains constant
Dthe country devalues its currency to boost export competitiveness
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Why the answer is B, and why the others tempt you.
The terms of trade are measured as the ratio of export price index to import price index, multiplied by 100. An improvement (favourable movement) occurs when a country's export prices rise relative to its import prices, meaning it can purchase more imports with the same quantity of exports. Option A describes a deterioration, while C and D relate to volumes and exchange rate policy respectively, not the terms of trade directly.
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