Terms of Trade Flashcards
1
Q
What are terms of trade?
A
The real value of a countries exports in terms of their imports.
2
Q
How do you calculate a countries terms of trade.
A
Price of exports
——————— X 100
Price of imports
3
Q
Factors which influence terms of trade
A
Marshall learner condition - A country such as the U.K must still import raw materials because they have limited access to them in their own countries
Economies of scale
Exchange rates - J curve, If a country devalues its currency it will get worse before it gets better as consumers need to get out of the habit of buying from abroad.
Non price factors - confidence and quality of goods.
Quality of labour
Productivity.
