Terms of Trade
A country's terms of trade are a measure of the price of its exports relative to the price of its imports, typically expressed as a ratio. A deterioration in the terms of trade occurs when import prices rise faster than export prices, meaning the country can afford fewer imports for a given volume of exports, effectively making the nation as a whole poorer.
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Economics
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Introduction to Macroeconomics Course
Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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Doubling of UK Structural Unemployment (1970-1985)
Reducing Inflation After a Supply Shock via a Negative Bargaining Gap
Terms of Trade
Estimating the Real Wage Impact of a Terms-of-Trade Loss
Restoring Supply-Side Equilibrium After a Negative Supply Shock
Analyzing an External Price Shock
A small, open economy is heavily dependent on imported oil for its energy and manufacturing needs. Following a major geopolitical event, the global price of oil doubles and is expected to remain high. Arrange the following domestic economic consequences in the most likely chronological order.
A manufacturing-based economy is heavily reliant on a specific imported metal for production. If the global price of this metal permanently increases by 40%, which of the following outcomes is the most probable consequence for the domestic economy, assuming both firms and workers try to avoid a reduction in their real incomes?
Inflationary Pressures from an Import Price Shock
The Macroeconomic Ripple Effect of an Import Price Shock
A sustained increase in the price of essential imported raw materials will lead to a temporary rise in unemployment, which will return to its original level once firms and workers adjust to the new, higher price level.
An economy experiences a large and persistent increase in the cost of essential imported inputs. Match each resulting economic phenomenon with its direct consequence.
When an economy experiences a permanent increase in the cost of essential imported inputs, the resulting conflict between firms raising prices and workers demanding higher wages to protect their real incomes leads to a sustained period of inflation and an eventual increase in the long-run or ____ unemployment rate.
An economy that is a net importer of oil experiences a permanent, sharp increase in the global price of oil. This event reduces the total real income available to be distributed between domestic firms and workers. Which statement best evaluates the fundamental economic conflict this creates and its ultimate resolution?
Evaluating Policy Responses to an Import Price Shock
Learn After
UK's Terms-of-Trade Loss in 2022
Divergent Impact of 2022 Energy Shocks on Terms of Trade
Economic Consequences of Higher Imported Input Costs
A nation's economy is primarily based on exporting raw agricultural products. It imports nearly all of its advanced technology and industrial equipment. In the last fiscal year, the average price of its agricultural exports fell by 8%, while the average price of its technology and equipment imports rose by 4%. Which of the following statements accurately analyzes the situation for this nation?
Analyzing Terms of Trade in a Global Energy Shock
Impact of Commodity Price Changes on Terms of Trade
Consider a country whose economy is heavily reliant on exporting oil and importing manufactured goods. If a global supply shock causes the price of oil to increase by 50% while the price of manufactured goods only increases by 5%, this country will experience a deterioration in its terms of trade.
Distributional Conflict Over Terms-of-Trade Losses