Question

Industry Exports Imports Automotive $550’000 $0 Fruits $0 $300’000 Financial Services $100’000 $0 What is the...

Industry

Exports

Imports

Automotive

$550’000

$0

Fruits

$0

$300’000

Financial Services

$100’000

$0

  1. What is the value of the intra-industry trade index in this example?

    1. 100%

    2. 0%

    3. 50%

    4. Not enough information
      Possible variations: change numbers and calculate IIT index

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Homework Answers

Answer #1

Intra industry trade occurs when a country export and imports goods within the same industry or product group.

For example, importing cars and exporting cars.

The value of intra industry trade is zero, when country only import or exports the good.

In case of automative industry country only export and in case of fruits industry country only imports.

Hence, intra trade industry index value will be 0.

Answer: option (b)

Note: intra industry trade value formula.

IIT = 1 - [| X - M | / (X + M)]

where, X is value of export

M is value of import.

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