Question 46
International TradeThe terms of trade is described as unfavourable when
- A.the price of imports rise relative to those of exports
- B.the price of exports rise relative to those of imports
- C.the net income from abroad does not change
- D.the value of exports exceeds those of imports.
Show the answer and explanation
Answer: A (the price of imports rise relative to those of exports)
Explanation
If import prices rise faster than export prices, each unit of exports buys fewer imports.