The terms of trade reflect the:
a. rate at which gold exchanges internationally for any domestic currency.
b. ratio at which nations will exchange two goods.
c. fact that the gains from trade will be equally divided.
d. cost conditions embodied in a single country's production possibilities curve.

The correct answer is option b.

Explanation:

The terms of trade is the ratio at which two countries exchange their goods. It is the ratio of exports and imports of a country. Terms of trade reflect the health of the economy.  

It measures the number of goods a country can import in exchange for the goods it is exporting.  

An increase in the price of exported goods will increase the terms of trade for a country. While an increase in the price of imported goods will cause it to decline.

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