Question

According to ML Jhingan International Economics "What is the formula for Gross Barter Terms of Trade?"
please don't use any other source

Answer 1

The Gross Barter Term of trade is a ratio of total physical quantities of imports to the total physical quantities of exports of a given country. In case of commodities it can be calculated at a point of time through the formula given Tg = (Qm / Qx) x 100

Qm is aggregate quantity of imports ;Tg is gross barter terms of trade; Qx is the aggregate quantity of exports. Higher the magnitude of Tg over 100, better are the gross barter terms of trade. It implies that the country can import larger quantities from abroad for the given quantities exported to other countries. On the opposite, if the magnitude of Tg is less than 100, it means the gross barter terms of trade are unfavourable to a given country and it can import smaller quantity of goods from abroad for the same quantity of exports. If the balance of trade of a country is in a state of balance and the total receipts from export of goods the net barter terms of trade.

Total Receipts from Exports = Total Payments for Imports

Px . Qx = Pm . Qm

Px/ Pm = Qm/Qx

Tc = Tg

When trade involves a large number of commodities and changes in terms of trade have to be compared. Gross Barter terms of Trade are a ratio of indices of quantities imported and the quantities exported.

In such a case , the gross barter terms of trade can be determined as Tg =Qm1 / Qm0 x 100

Qx1 / Qx0  

Qm1 and Qm0 are the quantity indices of imports in the current year (1) and base year (0) respectively. Qx1 and Qx0 are the quantity indices of exports in the current year (1) and base year (0) respectively.