Question

level 2
interpret the results for the following terms of trade.
supposing that the united states has an export index of 110 and an import index of 112. therefore th
equal 98.2%.
what can be concluded from this data?
the united states has a negative terms of trade, meaning it can buy fewer exports for each unit of imports.
the united states terms of trade have not changed from the base year.
the united states has a negative terms of trade, meaning it can buy fewer imports for each unit of exports.
the united states has a positive terms of trade, meaning it can buy more exports for each unit of imports.
the united states has a positive terms of trade, meaning it can buy more imports for each unit of exports.

Explanation:

The terms of trade (TOT) is calculated as \((\text{Export Index}/\text{Import Index})\times100\). Here, TOT \(=(110 / 112)\times100\approx98.2\). A TOT less than 100 (negative terms of trade) means that for each unit of exports, the country can buy fewer imports compared to the base - year (when TOT = 100).

Answer:

The United States has a negative terms of trade, meaning it can buy fewer imports for each unit of exports.