Question:
The table below shows the record of export price index and import price index of a country for a period of six years… In which year were the terms of trade most favourable relative to year 1?
(1) Year 2
(2) Year 3
(3) Year 4
(4) Year 5
(5) Year 6
Correct Answer:
(5)
Answer Explanation:
Terms of Trade (TOT) is calculated as (Export Price Index / Import Price Index) x 100. A “favourable” movement means this ratio increases, meaning export prices rose faster (or fell slower) than import prices. Year 6 yielded the highest TOT index value relative to the base year.
Topic: International Trade Year: 2021
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