Terms of Trade 4.1.4

Question 1

Define Terms of Trade

Answer 1

Ratio of export prices to import prices

Question 2

Terms of Trade Formula

Answer 2

Index of Export prices/Index of Import Prices X 100

Question 3

Factors influencing a countrys terms of trade

Answer 3

Raw Material Prices
Changes in Tariffs
Changes in Exchange rates
Inflation Rates

Question 4

Impacts of the terms of trade on Living Standards

Answer 4

If terms of trade improve Living standards increase
If terms of trade deteriorate Living standards decrease

Question 5

Impacts of the terms of trade on Competitiveness

Answer 5

If terms of trade Improve Competitiveness decreases as exports are more expensive than imports