Terms of Trade

Question 1

How to calculate terms of trade?

Answer 1

Index of average export price
——————————————– x 100
Index of average import price

Question 2

What are terms of trade?

Answer 2

The ratio of average export prices to average import prices

Shows how much a country can import per unit of export.

Question 3

What factors affect terms of trade?

Answer 3

1.; Inflation rate (higher cost level, lower competitiveness, lower export)

2. Productivity rates (more efficient, lower COP, more competitiveness, more export)
3. Exchange rate (weaker pound valuation, more export)

Question 4

How does inflation rate affect terms of trade?

Answer 4

Higher cost level leads to lower competitiveness and lower export

Question 5

How do productivity rates affect terms of trade?

Answer 5

More efficient production leads to lower cost of production (COP), more competitiveness, and more export

Question 6

How does exchange rate affect terms of trade?

Answer 6

Weaker pound valuation leads to more export

Question 7

What is the impact of changes in a country’s terms of trade?

Answer 7

GDP growth and employment

Question 8

what the hell is terms of trade?

Answer 8

Measurement of how much a country can receive (in imports) per unit of export