Gce Model Questions Vol1 2021 Economics Question 22
Practice objective / multiple choice question 22 from the 2021 Gce Model Questions Vol1 Economics examination.
Country B imports a good whose import‑price index was 120 (base 100) and exports a good with an export‑price index of 150. The terms of trade (ToT) are defined as the ratio of the export‑price index to the import‑price index. The government then imposes a specific tariff that raises the import‑price index by 10 % while the export‑price index remains unchanged. (i) What is the new terms of trade and the percentage change from the original ToT? (ii) If the country's initial export earnings were $200 billion and the volume of exports falls by 5 % because of reduced competitiveness, what is the change in export earnings in billions of dollars?
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About This Question
This is Gce Model Questions Vol1 2021 Economics Question 22. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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