International Monetary Fund data indicate that, with 2005 = 100.0, Thailand's export price index for 2011 was 104.7 and Thailand's import price index for 2011 was 111.1. Further, with 2005 = 100.0, the export price index for 2011 for the United Kingdom was 118.5 and the import price index for 2011 for the United Kingdom was 121.0. With this information, an economist would say that, from 2005 to 2011, Thailand experienced __________ in its commodity terms of trade and the United Kingdom __________ in its commodity terms of trade.
A) a deterioration; also experienced a deterioration
B) a deterioration; experienced an improvement
C) an improvement; experienced a deterioration
D) an improvement; also experienced an improvement

Question

Quizplus · Accepted Answer

Commodity terms of trade is the ratio of a country's export price index to its import price index. In this case, Thailand's commodity terms of trade for 2011 is 94.2 (104.7/111.1), which is lower than its base year of 100.0, indicating a deterioration. Similarly, the UK's commodity terms of trade for 2011 is 97.5 (118.5/121.0), which is also lower than its base year of 100.0, indicating a deterioration. Therefore, the correct answer is A, as both countries experienced a deterioration in their commodity terms of trade.

International Monetary Fund Data Indicate That, with 2005 = 100