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JAMB Economics 2015 Paper

Question : 48

Total: 70

The term of trade can be expressed as

Solution:

Concept:

Terms of trade compare export prices with import prices.

Explanation:

It is measured as the ratio of the price index of exports to the price index of imports.

The formula is:

\text{Terms of trade} = \frac{\text{Price index of exports}}{\text{Price index of imports}} \times 100

Using symbols:

\text{Terms of trade} = \frac{P_x}{P_m} \times 100

This shows how much imports can be bought with a given amount of exports.

Answer:

(\text{Price index of export} \div \text{Price index of import}) \times 100

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