In the Px = export price index, Pm = import price index, Qx = export quantity index,and Qm = import quantity index. Developing countries tend to maintain that their commodity term of trade have declined over the long run suggesting that _________ has declined?
Correct answer: A. Px/Pm
- A. Px/Pm
- B. Pm/Px
- C. (Pm/Px)Qm
- D. (Px/Pm)Qx
Explanation
The net barter terms of trade are measured by the export price index divided by the import price index, Px/Pm. A decline in this ratio means exports buy fewer imports than before.
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