A term-of-trade index that equals 90 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 fallen from $100 to $90
D) The price of imports has fallen from $100 to $90

Question

Quizplus · Accepted Answer

A term-of-trade index of 90 means that the country's terms of trade have deteriorated compared to the base year, requiring more domestic goods to obtain the same amount of foreign goods.

A Term-Of-Trade Index That Equals 90 Indicates That Compared to the Base