What is meant by terms of trade? How is it determined?
What will be an ideal response?
The terms of trade refers to the exchange rate of goods for goods. For example, if 170 apples are traded for 20 oranges, the terms of trade are 8.5 apples per orange. Terms of trade are determined on the basis of opportunity cost. For two people or countries to benefit from trade, the trading price must lie between their opportunity costs of producing the good in both countries.
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"Ceteris paribus" is a Latin expression that means "holding everything else constant."
a. True b. False Indicate whether the statement is true or false
Because resources tend to be specialized, increased production of military goods tends to
a. decrease the opportunity cost of more military goods. b. increase the opportunity cost of more non-military goods. c. increase the opportunity cost of more military goods. d. change the position of the production possibilities curve. e. alter the slope of the production possibilities curve.