WAEC Economics 2024 Paper

Concept:Terms of trade compares the price of exports with the price of imports to show trading gain or loss.Explanation:Terms of trade is calculated as:$$\text{Terms of Trade} = \frac{\text{Index of Export Prices}}{\text{Index of Import Prices}} \times 100$$It is favourable when export prices rise faster than import prices.A higher export price relative to import price means a country receives more for what it sells and pays less for what it buys.So, the ratio increases, making terms of trade favourable.Answer:D. price of exports is rising faster than that of imports