Relative inflation rates S.R

• What does inflation do to the price of goods/services within a country?

  It increases their price
• How does inflation affect the price of goods/services to the rest of the world?

  It makes them more expensive
• What happens to the terms of trade if exports are price inelastic in demand?

  It improves the terms of trade
• What is likely to happen to the terms of trade if exports are price elastic in demand?

  It is likely to worsen the terms of trade
• What are the effects of inflation on exports based on demand elasticity?

  • Price inelastic demand: Improves terms of trade
  • Price elastic demand: Worsens terms of trade