By terms of trade, we mean the?
-
A.
ratio of exports and imports -
B.
differences between exports and imports -
C.
differences between current account and capital account -
D.
index of export prices to import prices expressed as a percentage -
E.
ratio of short-term capital movements to long-term capital movements
Correct Answer: Option D
Explanation
Terms of trade (TOT) refers to the relative price of imports in terms of exports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods.