Neco 2020 Economics Question 1

Practice objective / multiple choice question 1 from the 2020 Neco Economics examination.

Neco 2020 Economics Objective / Multiple Choice Medium Difficulty
Question 1 NECO • 2020 • ECONOMICS • objective

Country X's export price index rose from 110 to 132 over a year, while its import price index increased from 100 to 119. During the same period, export volume grew by 6% and import volume grew by 4%. The country's real national income grew by 5% over the year. \( (a) \) Calculate the percentage change in the terms of trade. \( (b) \) Assuming that the change in real national income can be approximated by the sum of the net volume effect (export volume growth minus import volume growth) and the change in terms of trade, determine the contribution of the terms of trade change to the observed real income growth.

Answer Options

A. Terms of trade increased by approximately 0.75 %; its contribution to real income growth is about 0.75 %.
Correct Answer B. Terms of trade increased by approximately 0.92 %; its contribution to real income growth is about 0.92 %.
C. Terms of trade increased by approximately 0.92 %; its contribution to real income growth is about 0.70 %.
D. Terms of trade increased by approximately 1.15 %; its contribution to real income growth is about 1.15 %.
Correct Answer
B
Correct Option:
Terms of trade increased by approximately 0.92 %; its contribution to real income growth is about 0.92 %.

About This Question

This is Neco 2020 Economics Question 1. It is one of the objective questions from the 2020 Neco Economics examination.

Difficulty level: Medium .

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