Questions and Answers
What scenario describes a country experiencing favourable terms of trade?
Which of the following scenarios indicates unfavourable terms of trade?
In which situation would a country experience favourable terms of trade?
What is a condition for a country having favourable terms of trade?
Signup and view all the answers
Which of the following is NOT indicative of favourable terms of trade?
Signup and view all the answers
Study Notes
Favourable Terms of Trade
- Occurs when the prices of imports decline while export prices remain constant, enhancing purchasing power.
- Experienced when import prices decrease and export prices increase, benefiting the country's trade balance.
- Happens if import prices stay constant while export prices rise, leading to increased revenue from exports.
- Arises when both import and export prices rise, but the export price increase outpaces that of imports, improving terms of trade.
- Can occur when both import and export prices drop, provided the decrease in import prices is greater, resulting in better trade conditions.
Unfavourable Terms of Trade
- Occurs when import prices rise while export prices fall, decreasing the value derived from trade.
- Experienced if import prices remain constant while export prices decline, resulting in lower revenue from exports and negatively affecting the economy.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of the factors affecting terms of trade in economics. This quiz covers the conditions that lead to either favorable or unfavorable trade terms. Assess your knowledge on import and export price dynamics and their economic implications.
