Question : The term of trade refers to_____.
Option 1: the excess of import expenditures over export earnings
Option 2: the trade agreements
Option 3: the terms and conditions on which a country is offered loan
Option 4: the ratio between export prices and import prices
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Correct Answer: the ratio between export prices and import prices
Solution : The correct option is the ratio between export prices and import prices.
In 1927, the term trade was first used by US economist Frank William Taussig. The term trade refers to the ratio at which a country can exchange its exports for imports. It represents the relative prices of a country's exports and imports and is typically expressed as a numerical index or ratio. A favourable improvement in terms of trade means a country can buy more imports for the same quantity of exports, while an unfavourable decline means it can buy fewer imports.
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