1) what do the terms of trade measure? 2) What is the relationship between the t
ID: 1132925 • Letter: 1
Question
1) what do the terms of trade measure?2) What is the relationship between the terms of trade in a world of two trading nations?
3) how are the terms of trade measured in a world of more than two traded commodities? 1) what do the terms of trade measure?
2) What is the relationship between the terms of trade in a world of two trading nations?
3) how are the terms of trade measured in a world of more than two traded commodities?
2) What is the relationship between the terms of trade in a world of two trading nations? 2) What is the relationship between the terms of trade in a world of two trading nations?
3) how are the terms of trade measured in a world of more than two traded commodities?
Explanation / Answer
1)
Term of trade refers to the ratio of country export price index to import price index. or in other words, it measures the capability of one unit of export to buy import. Improvement in term of trade suggests that one unit of export would buy now more unit of import.
2)
Terms of trade between two countries is an indicative of relative healths of two economies. Rise in term of trade of one country an indicative of deterioration of terms of trade of another country.
3)
For more than two trade commodities,Collective index is prepared for all goods and services.
Following is terms of trade in case of more than two commodities:
= (Index of export price / Index of import price ) *100
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