Paper 2 · November 2010 · Exchange Rates and International Trade
In economics, the term 'terms of trade' refers to
Athe ratio of a country's export price index to its import price index, multiplied by 100.
Bthe total monetary value of a country's exports minus the total monetary value of its imports for a given period.
Cthe exchange rate at which a country's currency trades against its major trading partners' currencies.
Dthe physical volume of goods and services a country exports compared with the volume it imports in a year.
Explanation
Terms of trade is a price ratio: the index of a country's export prices divided by the index of its import prices, expressed as a percentage. It measures how many units of imports a given quantity of exports can buy, not a trade balance, an exchange rate, or a trade volume.
Derived from ZIMSEC Economics Paper 2, November 2010, Section B Q1