The formula (index of export prices)/(index of import prices) X 100 is used to measure the _________?

A. Volume of trade between countries
B. direction of international trade
C. commodity terms of trade
D. volume of imports

Correct Answer:

Option C – commodity terms of trade

Explanation

Term of trade refer to the rate at which a country’s exports exchange for its import. It is expressed as a relation between the prices a country receives for its export and the prices it pay for import. Term of trade is usually measured by this mathematical formula: