Terms of Trade
• Interpretation: During 1960-99 the nation’s export prices
fell by 14% in relation to its import prices
• 100 – 86 = 14
• If quantity exported is included
• if Q, rose from 100 in 1960 to 120 in 1999 then,
• N = (95/110)120 = 103.63
• The nation’s capacity to import increased by 3.63%
between 1960 and 1999.
In the formula N = (Px / Pm) Qx
N stands for country trade opportunities
Q means the quantity of goods of a certain type produced
Px denotes the export price of this product
Pm means the import price of this product
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