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JAMB Economics 1984 Question 44

Question 44

International Trade

An improvement in Nigeria's terms of trade should

  1. A.lead to a fall in cost of her imports in terms of what she must sacrifice to obtain them
  2. B.make 'made in Nigeria' goods cheaper to buy
  3. C.increase Nigeria's domestic output of commodities
  4. D.lead to an increase in her exchange rates
  5. E.lead to an increase in Nigeria's exports of petroleum.
Show the answer and explanation

Answer: A (lead to a fall in cost of her imports in terms of what she must sacrifice to obtain them)

Explanation

Better terms of trade mean each unit of exports buys more imports, so imports cost fewer exports.