A Term-Of-Trade Index That Equals 90 Indicates That Compared to the Base

question 103

Multiple Choice

A term-of-trade index that equals 90 indicates that compared to the base year:

• A) It requires a greater output of domestic goods to obtain the same amount of foreign goods
• B) It requires a lesser amount of domestic goods to obtain the same amount of foreign goods
• C) The price of exports has fallen from $100 to $90
• D) The price of imports has fallen from $100 to $90

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Definitions:

Gross Investment

The total expenditure on new capital assets (plant, equipment, buildings) before accounting for depreciation.

Net Export

The value of a country's total exports minus its total imports, representing the balance of trade.

Private Consumption

Expenditure by households on goods and services, excluding purchases of residences.

Government Spending

Expenses incurred by the government to provide goods and services, invest in public projects, and support economic stability and growth.