Question on: JAMB Economics - 2017

A country's terms of trade (TOT) is the ratio of its export prices to its import prices. An improvement in the terms of trade means a country can buy more imports for a given amount of exports. Reducing the demand for imported goods can improve the terms of trade. Here's why: * **Reduced Import Demand:** When a country reduces its demand for imported goods, it can potentially negotiate lower prices for those goods from its trading partners. * **Impact on Prices:** Lower demand puts downward pressure on the prices of imports. * **Improved TOT:** If import prices fall relative to export prices, the terms of trade improve. Therefore, by reducing the demand for imported goods, a country can potentially improve its terms of trade.