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Terms of Trade

IB Economics B hl/sl Unit 4 - International Economics

Ross McGlothlin

on 29 November 2011

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Transcript of Terms of Trade

Terms of Trade Terms of Trade (ToT) isn't Balance of Payments similarities
formula weighted index of export prices / weighted index of import prices
Index # (x100)
> 100 means...
< 100 means...

Improving and Deteriorating
not always good/bad
the effect of PED implications buying power - basket of goods how much of country "B"'s goods can a basket of country "A"'s goods be traded for? When export /import prices change, how is a country's buying power affected?
Causes of changes in ToT Short Run Changes in D&S Changes in relative inflation rates Changes in exchange rates Long Run Income changes
Improving productivity
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