Unit 4: Patterns & Terms of Trade Flashcards
1
Q
What is meant by Terms of Trade?
A
The volume of imports a country has to produce, in order to finance one unit of exports
2
Q
How do you Calculate the Terms of Trade?
A
Average Export Price Index / Average Import Price Index ( x 100% )
3
Q
What Factors influence Terms of Trade?
A
PED Relative Inflation Rates Raw Material Prices Exchange Rates Population
4
Q
What does the Terms of Trade Calculation Show?
A
> 100 : Terms of Trade are Improving
<100 : Terms of Trade are Worsening
5
Q
What does it mean if terms of trade are Improving?
A
Low inflation
Better standard of living
Worse balance of payments
6
Q
What does it mean if terms of trade are Worsening?
A
High inflation
Worse standard of living
Better balance of payments
