Th4.1: Terms of Trade Flashcards
1
Q
What will happen if a country buys a large amount of imports for a certain good?
A
this will increase demand for that good and hence increase the price
2
Q
This will worsen the terms of trade and therefore…
A
they can buy less imports with the amount of exports
3
Q
How will restrictions affect terms of trade?
A
they will reduce supply of the good and lead to a fall in the price received by the importer, so improve the terms of trade
