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JAMB Economics 1985 Question 35

Question 35

International Trade

By terms of trade, we mean the

  1. A.ratio of exports to imports
  2. B.difference between exports and imports
  3. C.difference between current account and capital account
  4. D.index of export prices to import prices expressed as a percentage
  5. E.ratio of short-term capital movements to long-term capital movements.
Show the answer and explanation

Answer: D (index of export prices to import prices expressed as a percentage)

Explanation

Terms of trade = (index of export prices ÷ index of import prices) × 100; it compares prices, not quantities.