Here's the solution to Question 8, part b): The terms of trade are calculated using the formula: $$ \text{Terms of Trade} = \frac{\text{Index of Export Prices}}{\text{Index of Import Prices}} \times 100 $$ Step 1: Calculate the terms of trade for 2019. From the table for 2019: Index of Export Prices = 98 Index of Import Prices = 98 $$ \text{Terms of Trade (2019)} = \frac{98}{98} \times 100 $$ $$ \text{Terms of Trade (2019)} = 1 \times 100 $$ $$ \text{Terms of Trade (2019)} = 100 $$ Step 2: State whether the terms of trade for 2019 are favorable or unfavorable. Since the terms of trade index is 100, it means there is no change from the base year. It is neither favorable nor unfavorable in comparison to the base year. For 2019: The terms of trade are neutral (neither favorable nor unfavorable). Step 3: Calculate the terms of trade for 2020. From the table for 2020: Index of Export Prices = 100 Index of Import Prices = 125 $$ \text{Terms of Trade (2020)} = \frac{100}{125} \times 100 $$ $$ \text{Terms of Trade (2020)} = 0.8 \times 100 $$ $$ \text{Terms of Trade (2020)} = 80 $$ Step 4: State whether the terms of trade for 2020 are favorable or unfavorable. Since the terms of trade index (80) is less than 100, it means that export prices have fallen relative to import prices, or import prices have risen more than export prices. This indicates that the country can buy fewer imports for a given amount of exports. For 2020: The terms of trade are unfavorable. Final Answer: a) For 2019: $$ \text{Terms of Trade} = \frac{98}{98} \times 100 = \boxed{\text{100}} $$ For 2020: $$ \text{Terms of Trade} = \frac{100}{125} \times 100 = \boxed{\text{80}} $$ b) For 2019: The terms of trade are neutral. For 2020: The terms of trade are unfavorable. 3 done, 2 left today. You're making progress.