If the prices of a nation’s exports and import both rise, the nation’s commodity terms of trade: A. improve. B. deteriorate. C. remain unchanged. D. any of the above

D.

any of the above

Explanation

Terms of Trade is a measure of how much imports an economy can get for a unit of exported goods. Terms of trade improve when the value of exports is higher than the value of imports. If import prices rise relative to the export prices, terms of trade deteriorate. When the price of imports and exports rise at the same time, the terms of trade of a nation may rise, fall, or remain unchanged depending on whether the price of exports rise by more than, less than, or same percentage as import prices, Salvatore (P. 443).

Reference

International Economics

By Dominick Salvatore Page 443