Neco Model Questions Vol1 2024 Economics Question 7

Practice objective / multiple choice question 7 from the 2024 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2024 Economics Objective / Multiple Choice Hard Difficulty
Question 7 NECO_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • objective

In year 1 a country's export price index is 120 and its import price index is 100. It exports 500 units and imports 800 units. In year 2 the export price index rises to 138 and the import price index to 110, while quantities exported and imported remain unchanged. (a) Compute the terms of trade index for each year and the percentage change between the two years. (b) Assuming the base‑year price of one unit is \(\mathrm{N}1\), calculate the real income measured in import‑goods units for each year and the percentage change in real income.

Answer Options

A. TOT₁ = 120, TOT₂ ≈ 122.5; improvement ≈ 2.1 %. Real income: 600 import‑goods units in year 1, ≈610.0 units in year 2; increase ≈1.7 %.
Correct Answer B. TOT₁ = 120, TOT₂ ≈ 125.5; improvement ≈ 4.6 %. Real income: 600 import‑goods units in year 1, ≈627.3 units in year 2; increase ≈4.5 %.
C. TOT₁ = 120, TOT₂ ≈ 128.0; improvement ≈ 6.7 %. Real income: 600 import‑goods units in year 1, ≈635.0 units in year 2; increase ≈5.8 %.
D. TOT₁ = 120, TOT₂ ≈ 124.0; improvement ≈ 3.3 %. Real income: 600 import‑goods units in year 1, ≈620.0 units in year 2; increase ≈3.3 %.
Correct Answer
B
Correct Option:
TOT₁ = 120, TOT₂ ≈ 125.5; improvement ≈ 4.6 %. Real income: 600 import‑goods units in year 1, ≈627.3 units in year 2; increase ≈4.5 %.

About This Question

This is Neco Model Questions Vol1 2024 Economics Question 7. It is one of the objective questions from the 2024 Neco Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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