A country has favourable terms of trade when the prices of her?

A. exports rise relative to the price of her imports
B. exports fall relative to the price of her imports
C. imports rise faster than the prices of imports
D. imports and exports move in the same direction

Correct Answer: Option A

A. exports rise relative to the price of her imports

Explanation

If the prices of a country’s exports rise relative to the prices of its imports, one says that its terms of trade have moved in a favourable direction, because, in effect, it now receives more imports for each unit of goods exported.