CA Foundation · Business Economics · International Trade
India's export price index rises from 100 to 120 while its import price index rises from 100 to 150 over a period. The net barter terms of trade for India in the later period (base = 100) are:
The net barter terms of trade equal 120 divided by 150, times 100, which is 80. The fall from the base of 100 shows India's terms of trade have worsened because import prices rose faster than export prices.
- A125
- B80Correct
- C120
- D150
Explanation
NBTT = (120/150) x 100 = 80. Since the value fell from 100 to 80, the terms of trade have deteriorated. Option A (125) comes from inverting the ratio (150/120 x 100). Options C and D simply quote one of the price indices.
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