During a specific trading period, a nation's import price index rose to 160 relative to a … — JAMB UTME

During a specific trading period, a nation's import price index rose to $160$ relative to a base year index of $100$ . If the nation's Net Barter Terms of Trade for the period was recorded as $87.5$ , by what percentage did the export price index change from the base year?

An increase of $40\%$ Answer
B
An increase of $82.9\%$
C
A decrease of $12.5\%$
D
A decrease of $27.5\%$

Answer

An increase of

40\%

The correct answer is derived using the standard formula

N = \frac{P_x}{P_m} \times 100

. Substituting the given terms of trade (

87.5

) and import price index (

160

) gives

87.5 = \frac{P_x}{160} \times 100

. Rearranging yields

P_x = 140

. Comparing

140

to the base year index of

100

confirms an increase of

40\%

Step-by-Step Solution

Identify the given variables and standard formula for Net Barter Terms of Trade.

The formula is

N = \frac{P_x}{P_m} \times 100

, where

N = 87.5

(Net Barter Terms of Trade) and

P_m = 160

(Import Price Index).

Net Barter Terms of Trade measures the ratio of export prices to import prices relative to a base period.

Rearrange the formula to solve for the Export Price Index (

P_x

P_x = \frac{N \times P_m}{100} = \frac{87.5 \times 160}{100} = 140

Multiplying both sides by

P_m

and dividing by

100

isolates the current period export price index.

Calculate the percentage change from the base year export price index (

100

\text{Percentage Change} = \frac{140 - 100}{100} \times 100\% = +40\%.

Comparing the current export price index of

140

to the baseline of

100

shows a

40\%

increase.

Key Concept

Calculation of Net Barter Terms of Trade and unknown index components

Estimated Time:2m 0s

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