In a given trading period, a nation recorded an export price index of 140 and an import pr… — JAMB UTME

In a given trading period, a nation recorded an export price index of $140$ and an import price index of $175$ , with the base year index set at $100$ . What is the Net Barter Terms of Trade for this nation?

$80.00$ Answer
B
$125.00$
C
$157.50$
D
$35.00$

Answer

The Net Barter Terms of Trade is

80.00

, indicating an unfavorable terms of trade since the index is below

100

The Net Barter Terms of Trade is defined as the ratio of the index of export prices to the index of import prices, expressed as a percentage:

TOT = (P_x / P_m) \times 100

. Substituting

P_x = 140

and

P_m = 175

gives

(140 / 175) \times 100 = 80.00

Step-by-Step Solution

Identify the formula for Net Barter Terms of Trade (TOT).

TOT = \left(\frac{\text{Index of Export Prices}}{\text{Index of Import Prices}}\right) \times 100

Net Barter Terms of Trade measures the ratio between export price changes and import price changes relative to a base period.

Substitute the given values into the formula.

TOT = \left(\frac{140}{175}\right) \times 100

The export price index is

140

and the import price index is

175

Perform the division and simplify.

TOT = 0.80 \times 100 = 80.00

Dividing

140

175

yields

0.80

, which scales to

80.00

when multiplied by

100

Key Concept

Net Barter Terms of Trade Calculation

Estimated Time:1m 30s

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