Terms of Trade Flashcards
1
Q
define ToT and give the formula
A
an index that measures the relative movements in the prices of exports and imports
2
Q
what are 2 adjectvies for Aus TOt
A
volatile and price taker
3
Q
what determines theXPI
A
commodity prices (inelastic so fluctuate a lot) global economic growth
4
Q
what determines MPI
A
price of manufacturing goods (elastic so not much fluctuation)
domestic economic growth
5
Q
how much ToT fall after 2011
A
45%
6
Q
what are the 6 things effected by changes in ToT
A
- business cycle (positive relo)
- output and employment
- trade and CAB
- Exchange Rate
- National Income
- Investment
7
Q
what does the ToT measure and what does the TB measure - what is the relationship
A
ToT - prices of X/M
TB - value of X/M
positive relo
