Neco 2023 Economics Question 43
Practice objective / multiple choice question 43 from the 2023 Neco Economics examination.
Country X exports two goods A and B and imports two goods X and Y. The export price index is \(E = 0.6P_{A} + 0.4P_{B}\) and the import price index is \(I = 0.5M_{X} + 0.5M_{Y}\). Initially \(P_{A}=120\), \(P_{B}=80\), \(M_{X}=100\) and \(M_{Y}=150\). In the following year \(P_{A}\) rises by 10 %, \(P_{B}\) falls by 5 %, \(M_{X}\) rises by 8 % and \(M_{Y}\) is unchanged. Calculate the percentage change in the terms of trade, defined as \(ToT = \dfrac{E}{I}\). Express the change to one decimal place.
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About This Question
This is Neco 2023 Economics Question 43. It is one of the objective questions from the 2023 Neco Economics examination.
Difficulty level: Medium .
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