In the following partially-completed table showing country I's demand for import good Y and supply of export good X at various terms of trade,
$\begin{array} { c c c }
\text { TOT } & \text { Y demanded } & \text { supplied } \
& & \
\hline4 \mathrm { Y } : 1 \mathrm { X } & 400 \mathrm { Y } & 100 \mathrm { X } \
3 \mathrm { Y } : 1 \mathrm { X } & \mathrm { v } & 120 \mathrm { X } \
2 \mathrm { Y } : 1 \mathrm { X } & 300 \mathrm { Y } & \mathrm { w }
\end{array}$
A) v = 40Y; w = 600X
B) v = 360Y; w = 150X
C) v = 350Y; w = 140X
D) v = 360Y; w = 140X

Question

In the following partially-completed table showing country I's demand for import good Y and supply of export good X at various terms of trade,
$\begin{array} { c c c } 
\text { TOT } & \text { Y demanded } & \text { supplied } \
& & \
\hline4 \mathrm { Y } : 1 \mathrm { X } & 400 \mathrm { Y } & 100 \mathrm { X } \
3 \mathrm { Y } : 1 \mathrm { X } & \mathrm { v } & 120 \mathrm { X } \
2 \mathrm { Y } : 1 \mathrm { X } & 300 \mathrm { Y } & \mathrm { w }
\end{array}$
A) v = 40Y; w = 600X
B) v = 360Y; w = 150X
C) v = 350Y; w = 140X
D) v = 360Y; w = 140X

Quizplus · Accepted Answer

The table shows a relationship between the terms of trade (TOT) and the demand/supply of goods Y and X. As the TOT decreases from 4Y:1X to 3Y:1X, we expect the quantity of Y demanded to increase due to the lower relative price of imports. Similarly, as the TOT further decreases to 2Y:1X, the quantity of X supplied increases due to the higher relative price of exports. Choice B correctly reflects this economic principle, showing an increase in both Y demanded and X supplied as the TOT becomes more favorable for country I.

In the Following Partially-Completed Table Showing Country I's Demand for Import