The following table gives hypothetical export price indexes and import price indexes (1990=100) for Japan, Canada, and Ireland. Compute the terms of trade index for each country in 1990 and 2006. Which country’s TOT improved, worsened, or showed no changed compared to its TOT in 1990? Export Price Index Import Price Index Country 1990 2006 1990 2006 Japan 100 150 100 140 Canada 100 175 100 175 Ireland 100 167 100 190

The following table gives hypothetical export price indexes and import price indexes (1990=100) for Japan, Canada, and Ireland. Compute the terms of trade index for each country in 1990 and 2006. Which country’s TOT improved, worsened, or showed no changed compared to its TOT in 1990?

Export Price Index Import Price Index
Country 1990 2006 1990 2006
Japan 100 150 100 140
Canada 100 175 100 175
Ireland 100 167 100 190

 

 

 

Answer:

Terms of trade= price of exports\price of imports

Japan- 1990 terms of trade=100/100=1

for 2006 terms of trade= 150/140 = 1.07

Therefore,for japan the terms of trade has improved.

Canada terms of trade for 1990 is 1

2006 terms of trade is 175/175= 1

Therefore,for Canada there is no change in terms of trade.

Ireland- 1990terms of trade is 1.

for 2006 is 167/190 0.87.

Therefore,for Ireland terms of trade has worsened.

Asked on February 14, 2018 in economics.
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