Terms of Trade

What does the terms of trade refer to?

• The average price of a unit of exports compared to the average price of a unit of imports

• The general and sustained rise in the average level of prices a nation faces compared to its trading partners

• The quantity of exports divided by the quantity of imports

• Total ratio of imports to the country's GDP

With reference to the table, what is the ToT in 2015 and has there been an improvement or deterioration in the ToT?

• 95.13 improvement

• 101.98 improvement

• 102.52 deterioration

• 103.60 deterioration

With reference to the table below, what is the ToT in 2016.

• 98.52

• 98.13

• 101.90

• 103.60

With reference to the table below, has there been an improvement or deterioration in the terms of trade in 2016 compared to 2015?

• Deterioration

• Improvement

• No Change

• Cannot be determined

Which of the following is not a potential cause of change in a country's terms of trade?

• Stronger exchange rate

• Greater structural unemployment

• Higher inflation rate

• Higher productivity of FoPs

A nation's ToT can improve if the demand for its exports______ , or the supply of its exports ______.

• declines, rises

• rises, declines

• declines, declines

• rises, rises

Countries which have relatively price ________ demand for their exports from the rest of the world will benefit more from a(n) ______ in their terms of trade.

• inelastic, increase

• elastic, increase

• both (a) and (b)

• neither (a) nor (b)

When improvements in the ToT arise from increases in domestic inflation, the BoT improves when demand for exports is price __________, and worsens the BoT when demand for exports is price ___________.

• elastic, inelastic

• perfectly elastic, price inelastic

• perfectly inelastic, perfectly elastic

• inelastic, elastic

An exchange rate appreciation _________ the ToT, and an exchange rate depreciation_________ the terms of trade.

• improves, improves

• deteriorates, improves

• improves, deteriorates

• deteriorates, deteriorates

An exchange rate appreciation improves the ToT. If the price elasticity of X and M are both elastic, the trade balance will _____________. The the price elasticity of X and M are both inelastic, the trade balance will __________.

• improve, improve

• improve, deteriorate

• deteriorate, improve

• deteriorate, deteriorate