country A had an index of export prices of 12% over the previous year and an index of import price of 5% over the previous year. What wiil be its terms of trade?
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may be deficit trade....?
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The answer is 2.4.
Explanation:
Given that,
Index of export prices over the previous year = 12%
Index of import prices over the previous year = 5%
Terms of trade refers to the ratio of index of export prices and index of import prices.
Terms of trade:
= Index of export prices over the previous year ÷ Index of import price over the previous year
= 12% ÷ 5%
= 2.4
Therefore, the country A's terms of trade is 2.4.
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