The "income terms of trade" index would be calculated by which one of the following formulas (where P_X = price index of exports, P_M = price index of imports, Q_X = quantity index of exports, and Q_M = quantity index of imports)? A) (P_X/P_M).100 B) (Q_M/Q_X).100 C) (P_X.Q_X)/P_M D) (P_X.Q_X)/(P_M.Q_M).100

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Quizplus · Accepted Answer

The income terms of trade index measures the ratio of the value of exports to the value of imports. Income Terms of Trade = (P_X x Q_X) / (P_M x Q_M) Option C is the correct formula that calculates the income terms of trade index.

The "Income Terms of Trade" Index Would Be Calculated by Which