Suppose that the U.S.price index for its imports rose from 100 to 120
From 2010 to 2011 and the price index for its exports remained
Unchanged.Which of the following statements is CORRECT?
A)The U.S.terms of trade worsened between 2010 and 2011.
B)The U.S.terms of trade improved between 2010 and 2011.
C)The U.S.terms of trade improved in 2010 and worsened in 2011.
D)There was no change in the U.S.terms of trade between 2010 and 2011.

Question

Quizplus · Accepted Answer

A rise in the index for imports implies that the U.S. has to pay more for its imports in terms of its exports. Since the price index for exports has remained unchanged, the U.S. is receiving the same amount for its exports. Therefore, the U.S. terms of trade have worsened as it has to export more to obtain the same amount of imports.

Suppose That the U