Terms of Trade (1 Viewer)

[michaeljennings]

If the terms of trade were to deteriorate (import prices rising faster than export prices) would i be correct in saying the balance on goods and services would improve as imports now are more expensive and less attractive?

Also a multiple choice question I was having trouble with
Which of the following is NOT an impact of high inflation
a) A decrease in savings
b) A decrease in international competitiveness
c) A decrease in income equality
d) A decrease in the CAD
Is the answer D?

If the level of GDP in an economy grew from $150 bil to $200 bil from year 1 to year 2 and CPI in year 1 was 105 and CPI in year 2 was 125, what is the value of real GDP in year 2?
a) $100bil
b) $168bil
c)$200 bil
d) $240 bil
What is the answer

 

[Bobbo1]

For your first question, there will a deterioration in the balance on goods and services because of higher prices which Australian will have to pay.
For multiple choice 1, yes i would also go with D
for 2: i calculated the as 125/105=1.19. Then 1.19 x 150 = 178.57... so I dont where I went wrong, where did u get these questions from??

 

[powlmao]

For your first question, there will a deterioration in the balance on goods and services because of higher prices which Australian will have to pay.
For multiple choice 1, yes i would also go with D
for 2: i calculated the as 125/105=1.19. Then 1.19 x 150 = 178.57... so I dont where I went wrong, where did u get these questions from??

What is the formula you used?

 

[michaeljennings]

For your first question, there will a deterioration in the balance on goods and services because of higher prices which Australian will have to pay.

But if import prices are higher doesnt that mean australia will be less likely to buy imports in the first place, hence it should improve?

 

[sakatahahaha]

If the terms of trade were to deteriorate (import prices rising faster than export prices) would i be correct in saying the balance on goods and services would improve as imports now are more expensive and

Haha what a contradicting statement in itself. No your horribly utterly wrong lol. Its not referring to the PRICE where paying for imports what where importing could be $1 however !! If we import 700million things worth $1 yet where only Exporting 600 million things worth $1 it means we have a deterioration doesn't relatively mean imports are expensive it just means what were paying for imports exceeds revenue we receive for exports. May not be the best explanation out and you might still not understand hope this helps though

 

[powlmao]

If the terms of trade were to deteriorate (import prices rising faster than export prices) would i be correct in saying the balance on goods and services would improve as imports now are more expensive and less attractive?

Also a multiple choice question I was having trouble with
Which of the following is NOT an impact of high inflation
a) A decrease in savings
b) A decrease in international competitiveness
c) A decrease in income equality
d) A decrease in the CADIs the answer D? Yes

If the level of GDP in an economy grew from $150 bil to $200 bil from year 1 to year 2 and CPI in year 1 was 105 and CPI in year 2 was 125, what is the value of real GDP in year 2?
a) $100bil
b) $168bil
c)$200 bil
d) $240 bil
What is the answer

For the second, finding the real GDP is RealGDP=NominalGDP*100/Price Index


Can someone tell be if i am wrong with that formula above? I am pretty sure it is correct

 

[michaeljennings]

@powlmao thats what i thought so do you just do 200 divided by 125??? i think maybe the question is just wrong

 

[powlmao]

Not 100% sure. The Economics Syllabus has changed to exclude any hard mathematics, so the division would be fairly simple and equate to a nice number.