Which event is most likely to improve a country's terms of trade?
Correct answer: A. Export prices rise relative to import prices
- A. Export prices rise relative to import prices
- B. Import prices rise relative to export prices
- C. The domestic money supply falls without trade changes
- D. Domestic unemployment rises while trade prices remain fixed
Explanation
Terms of trade compare export prices with import prices. When export prices rise relative to import prices, the country can obtain more imports for a given quantity of exports.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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