A terms-of-trade index that equals 150 indicates that compared to the base year,
A) it requires a greater output of domestic goods to obtain the same amount of foreign goods.
B) it requires a lesser amount of domestic goods to obtain the same amount of foreign goods.
C) the price of exports has risen from $100 to $150.
D) the price of imports has risen from $100 to $150.

Question

Quizplus · Accepted Answer

A terms-of-trade index of 150 implies that a country can buy the same quantity of imports for 150% of the amount of exports it sells. Therefore, it requires a lesser amount of domestic goods to obtain the same amount of foreign goods.

A Terms-Of-Trade Index That Equals 150 Indicates That Compared to the Base