TOT 3 PPT Flashcards
What type of goods dominate Australia’s exports?
Primary commodities (mining & agriculture).
What type of goods dominate Australia’s imports?
Manufactured goods.
How does an increase in commodity prices affect XPI?
A: Higher commodity prices → XPI increases → ToT improves.
How do rising production costs of imported goods affect MPI?
Higher production costs → MPI increases → ToT worsens.
How does a depreciating AUD affect imports?
Imports become more expensive → MPI increases → ToT worsens.
How does a depreciating AUD affect exports?
Exports become cheaper → Higher demand → XPI increases → ToT impact depends on XPI vs MPI changes.
How does an appreciating AUD affect exports?
Exports become more expensive → Lower demand → XPI decreases.
How does an appreciating AUD affect imports?
Imports become cheaper → MPI decreases.
How does an appreciating AUD impact ToT?
If XPI falls more than MPI, ToT worsens.
If MPI falls more than XPI, ToT improves.
How did rising coal & iron ore prices affect ToT?
XPI increased → ToT improved.
How did rising refined petroleum prices affect ToT?
MPI increased → ToT worsened.
What happened to XPI & ToT in 2016-2019?
World growth increased → XPI ↑ 40% → ToT ↑ 30%.
What happened to XPI & ToT in 2020 (COVID-19)?
Global recession → XPI & MPI fell → ToT declined.
hat happened to XPI & ToT in 2021 (economic recovery)?
Surge in demand for commodities → XPI & ToT increas
What happened to XPI & ToT in 2022 (Ukraine-Russia war)?
Energy prices spiked → XPI increased → ToT reached record highs.
What happened to XPI & ToT in 2022-2024?
Iron ore prices fell → XPI decreased → ToT declined.
Why is the MPI less volatile than XPI?
Manufactured goods (imports) have more stable prices due to elastic supply.
Why are manufactured goods more elastic?
Production can be increased quickly.
More substitutes available.
More global suppliers.
