Assume 1990 to be the base year.If by the end of 2004 a country's export price index rose from 100 to 125 while its import price index rose from 100 to 125, its terms of trade would equal 100.

Question

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The terms of trade formula is (Export Price Index) / (Import Price Index) x 100. In this case, both the export and import price indices have increased by the same percentage, so the terms of trade will remain the same at 100.

Assume 1990 to Be the Base Year