Neco Model Questions Vol1 2017 Economics Question 19

Practice objective / multiple choice question 19 from the 2017 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2017 Economics Objective / Multiple Choice Medium Difficulty
Question 19 NECO_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

Country X exports only wheat and imports only cloth. In year 1 the world price of wheat is ₦\(120\) per ton and the price of cloth is ₦\(80\) per metre. Country X exports \(500\) tons of wheat and imports \(1{,}200\) metres of cloth. In year 2 the price of wheat rises to ₦\(150\) per ton while the price of cloth falls to ₦\(70\) per metre, and the quantities exported and imported remain the same. (a) Calculate the terms of trade (ratio of export price index to import price index) for each year, expressed as a percentage. (b) Determine the percentage change in Country X's net export earnings (export revenue minus import expenditure) from year 1 to year 2.

Answer Options

A. Year 1 TOT = 160 %; Year 2 TOT = 220 %; net export earnings improved by 80 %
B. Year 1 TOT = 140 %; Year 2 TOT = 200 %; net export earnings improved by 60 %
Correct Answer C. Year 1 TOT = 150 %; Year 2 TOT = 214.29 %; net export earnings improved by 75 %
D. Year 1 TOT = 130 %; Year 2 TOT = 190 %; net export earnings improved by 50 %
Correct Answer
C
Correct Option:
Year 1 TOT = 150 %; Year 2 TOT = 214.29 %; net export earnings improved by 75 %

About This Question

This is Neco Model Questions Vol1 2017 Economics Question 19. It is one of the objective questions from the 2017 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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