HL term of trade

Question 1

term of trade def

Answer 1

the ratio of an index of a country’s export prices to an index of its import prices.

Question 2

price index

Answer 2

Ip=(p1/P0)x100

Question 3

factors affecting tot in the short run

Answer 3

• changes in demand
• changes in supply
• changes in inflation rate
• changes in exchange rate

Question 4

factors affecting tot in the long run

Answer 4

• income changes

- improvements in productivity

Question 5

tot for developing countries

Answer 5

• developing countries depends on exports
• subsantial increase in supply of commodities mostly because of improvements technology
• new materials make demand increase slower than usual

Question 6

improvement in the tot

Answer 6

If a country’s terms of trade improve, it means that for every unit of exports sold it can buy more units of imported goods.

Question 7

deterioration in tot

Answer 7

a country has to export more to purchase a given quantity of imports