CA Foundation · Business Economics · International Trade
A country's net barter terms of trade are calculated as the ratio of:
Net barter terms of trade are the export price index divided by the import price index, multiplied by 100. A rising value means each unit of exports buys more imports, so it signals an improvement for the country.
- AExport price index to import price index, multiplied by 100Correct
- BImport price index to export price index, multiplied by 100
- CQuantity of exports to quantity of imports, multiplied by 100
- DValue of exports to value of imports, multiplied by 100
Explanation
The net (commodity) barter terms of trade equal (Px/Pm) x 100, comparing the prices a country receives for exports with the prices it pays for imports. Option B inverts the ratio, which would make a rise indicate deterioration. Options C and D use quantities or values, which describe the volume of trade or the trade balance, not relative prices.
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