4.1.4 Terms of trade Flashcards
1
Q
What is meant by the terms of trade?
A
is the ratio of export prices to import prices
2
Q
How is the terms of trade calculated?
A
index of export prices/index of import prices x 100
3
Q
How does the terms of trade affect competitiveness of a country?
A
if export prices are higher then countries who export more would be more competitive
4
Q
How does the terms of trade affect the living standards in a country?
A
- if a country exports more, govt can gain revenue and invest in infrastructure or better housing
- import better resources or materials
5
Q
What are some factors which might affect the terms of trade?
A
- inflation rate
- elasticity
- competitiveness of firms
- exchange rate
- improvement in technology
