Trade

Question 1

TOT

Answer 1

how much money a country pays for its imports and how much it brings in from exports

Question 2

Factors influencing TOT in developing countries - Demand and supply

Answer 2

1. Elasticity of Demand and Supply in two Countries
   - reciprocal demand
   a) elasticity of country’s demand for imports
   b) elasticity of foreign country’s demand for exports
   c) elasticity of supply of country’s imports
   d) elasticity of supply of country’s exports
2. Changes in Demand
   - if demand for imports increases prices of imports go up and it turns against that country
   -if demand for exports increases prices of exports go up and its favorable

Question 3

Factors influencing TOT in developing countries - Devaluation

Answer 3

lowering exchange rate of domestic currency in terms of other.
- dearer imports and cheaper exports

Question 4

Factors influencing TOT in developing countries which ones

Answer 4

1. Elasticity of Demand and Supply in two Countries , 2. Changes in Demand, 3. Devaluation, 4. Tariffs, 5. Substitutes, 6. Econ structure, 7. Econ development

Question 5

Tariffs

Answer 5

reduce imports but increase exports

Question 6

Substitutes

Answer 6

favorable - not a close substitute for exports on foreign market
favorable - close substitute of imports in the country’s market

Question 7

Economic Structure

Answer 7

if country exports agricultural raw materials - not favorable declining tendency
but if - inudstrial goods > favorable

Question 8

Economic development

Answer 8

demand (income) effect , supply effect

• demand for imported good increasis due to increase in income per capita
  it may lead to output of these otherwise imported products so this pushes exports up > SUPPLY EFFECT

if demand effect is more powerful - against the country

Question 9

Effect of devaluation and appreciation on TOT

Answer 9

appreciation makes imports cheaper but exports more competitive
devaluation makes imports dearer and exports stay the same