If, over a period of a year, a country's import price index rises from 100 to 120 and its export price index rises from 100 to 110, its index for the terms of trade has

Question

Quizplus · Accepted Answer

The terms of trade index is calculated as (Export Price Index / Import Price Index) * 100. Initially, it was (100/100)*100 = 100. After the changes, it becomes (110/120)*100 = 91.66, indicating a fall.

If, Over a Period of a Year, a Country's Import