Neco Model Questions Vol1 2019 Economics Question 23

Practice objective / multiple choice question 23 from the 2019 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2019 Economics Objective / Multiple Choice Medium Difficulty
Question 23 NECO_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

In year 0 the export price index of Country X was 120 and the import price index was 110. In year 1 the export price index rose to 135 while the import price index rose to 130. (a) Compute the terms of trade index for each year and the percentage change between the two years. (b) If export volume grew by 5 % and import volume grew by 8 % over the same period, by what percentage did the value of imports grow relative to the value of exports? State the implication for the trade balance.

Answer Options

A. a) ToT₀≈109.1, ToT₁≈106.0, change≈‑2.8 %; b) import value grew about 5.0 % more than export value, worsening the trade balance.
Correct Answer B. a) ToT₀≈109.1, ToT₁≈103.8, change≈‑4.9 %; b) import value grew about 9.5 % more than export value, worsening the trade balance.
C. a) ToT₀≈108.0, ToT₁≈104.5, change≈‑4.2 %; b) import value grew about 7.2 % more than export value, worsening the trade balance.
D. a) ToT₀≈110.5, ToT₁≈102.0, change≈‑7.8 %; b) import value grew about 12.3 % more than export value, improving the trade balance.
Correct Answer
B
Correct Option:
a) ToT₀≈109.1, ToT₁≈103.8, change≈‑4.9 %; b) import value grew about 9.5 % more than export value, worsening the trade balance.

About This Question

This is Neco Model Questions Vol1 2019 Economics Question 23. It is one of the objective questions from the 2019 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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