JAMB Commerce 2013 Paper

Concept:Terms of trade measure the relationship between a country's export prices and its import prices.Explanation:Terms of trade is expressed as the ratio of export prices to import prices: $\text{TOT} = \frac{\text{Export Prices}}{\text{Import Prices}}$.For example, if the ratio is written as $\frac{\text{Export Prices}}{\text{Import Prices}}$, an improvement happens when this fraction becomes larger.That means the country receives more imports for the same amount of exports, or its exports are earning relatively more.Therefore, the terms of trade improve when the ratio of export prices to import prices increases.Answer:C. increases