Question:
What is the formula used to calculate a country’s commodity terms of trade?
(1) (Export Price Index – Import Price Index) x 100
(2) (Import Price Index – Export Price Index) x 100
(3) (Export Price Index / Import Price Index) x 100
(4) (Import Price Index / Export Price Index) x 100
(5) (Export Volume Index / Import Price Index) x 100
Correct Answer:
(3)
Answer Explanation:
The Commodity Terms of Trade (also known as the Net Barter Terms of Trade) is an index that measures the relative purchasing power of a country’s exports. The universal formula is the ratio of the Export Price Index to the Import Price Index, multiplied by 100.
Topic: International Trade Year: 2019
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