Terms of Trade as Export-Import Price Ratio

Steps:

• Recall that terms of trade evaluate a country's export and import price relationship in international economics.
• Eliminate options unrelated to price ratios: A describes trade balance, B is exchange rate, C involves tariffs.
• Identify D as the standard definition matching economic theory.
• Confirm via formula: Terms of trade index = (Export price index / Import price index) × 100.

Why D is correct:

• Defined in economics as the ratio of a country's average export prices to its average import prices, indicating how many imports can be bought with exports.

Why the others are wrong:

• A: This is the trade balance or current account deficit/surplus.
• B: This defines the foreign exchange rate.
• C: This misrepresents tariff policies, not price ratios.

Final answer: D