1.4 Terms of Trade

Question 1

What are the ToT?

Answer 1

Measures value of exports against the value of imports in a country

Question 2

ToT formula?

Answer 2

Index price of X / Index price of m

Question 3

Factors influencing ToT?

Answer 3

1) Exchange rates
2) Trade cycle
3) Change in global commodity prices
4) Prebisch-Singer Hypothesis

Question 4

Effects of a change in ToT?

Answer 4

1) Impact on living standards
2) Impact on BoP + competitiveness