Gross barter terms of trade takes into account for all goods
Answers
Answer:
The gross barter term of trade is a ratio of total physical quantities of imports to the total physical quantities of exports of a given country.
Given the above definition, the gross barter terms of trade in case of particular commodities can be measured at a point of time through the formula given below:
TG = (QM/QX) × 100
ADVERTISEMENTS:
Here TG is gross barter terms of trade, QM is aggregate quantity of imports and QX is the aggregate quantity of exports. Higher the magnitude of TG over 100, better are the gross barter terms of trade. It implies that the country can import larger quantities from abroad for the given quantities exported to other countries. On the opposite, if the magnitude of TG is less than 100, it means the gross barter terms of trade are unfavourable to a given country and it can import smaller quantity of goods from abroad for the same quantity of exports.
If the balance of trade of a country is in a state of balance and the total receipts from export of goods are exactly equal to the payments for import of goods, the net barter terms of trade will be equal to the gross barter terms of trade.
Total Receipts from Exports = Total Payments for Imports
When there is a deficit or surplus in trade balance, the gross barter and net barter terms of trade will differ from each other (TC <> TG).
ADVERTISEMENTS:
When trade involves a large number of commodities and changes in terms of trade have to be compared between two periods, the gross barter terms of trade are a ratio of indices of quantities imported and the quantities exported.
In such a case, the gross barter terms of trade can be determined as:
Here QM1 and QM0 are the quantity indices of imports in the current year (1) and base year (0) respectively. QX1 and QX0 are the quantity indices of exports in the current year (1) and base year (0) respectively.
ADVERTISEMENTS:
Answer:
The gross barter term of trade exists as a ratio of whole physical quantities of imports to the total physical quantities of exports of a given country.
Explanation:
Neglect of Qualitative Changes:
The gross barter terms of trade ratio obviously take into account the physical amounts of imports and exports but forget the fact that there might have existed qualitative gains in an exhibition in the exporting and importing nations. Such differences can have a very significant effect on welfare, yet these are not reflected through the gross barter terms of trade.
Neglect of Capital Movements:
The international capital movements have a quite significant influence on the balance of payments and the public economic condition of a country. This important aspect, however, has not seen true expression in the measurement of the gross barter duration of the trade.
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