A country's terms of trade can be improved by________?

Step 1: Analyze the question

The question asks how a country's terms of trade can be improved.

Step 2: The concept

Terms of trade = (Index of export prices ÷ Index of import prices) × 100

The terms of trade improve when export prices rise relative to import prices. In other words, the country can buy more imports for the same quantity of exports.

Step 3: Evaluate each option

• A. Revaluation of currency: Revaluation raises the official value of the local currency against foreign currencies. Imports become cheaper in local currency terms, and foreign buyers pay more, in foreign currency, for the country's exports. Import prices fall relative to export prices, so the terms of trade improve in price terms. This fits the definition.
• B. Collective bargaining: This is negotiation between workers' unions and employers over wages and conditions. It has nothing to do with international trade prices.
• C. Reducing demand for imported goods: This may improve the balance of trade, and a large country might push down import prices a little. But it is not the standard way to improve terms of trade, and it concerns quantities, not the price ratio.
• D. Imposing lower export duties: Lower export duties may encourage exports and lower their prices, which could worsen the terms of trade.

Step 4: Answer

Revaluation of currency**.

Exam tip: Remember "revalue = stronger currency = cheaper imports." Terms of trade is about the price ratio of exports to imports, not about quantities traded. Do not confuse it with the balance of trade, which compares values.