Terms of Trade as a Unitless Ratio

Steps:

• Recall that terms of trade (TOT) compares export prices to import prices.
• TOT is calculated as (Export Price Index / Import Price Index) × 100.
• Both numerator and denominator are index numbers, which are percentages without monetary units.
• The ratio cancels out any units, leaving a pure number.

Why C is correct:

• Terms of trade is defined as a ratio of two price index numbers, so it has no monetary units by construction.

Why the others are wrong:

• A: Calculation accuracy is unrelated to units; TOT is precisely a ratio.
• B: It uses a single domestic currency for both indices, not multiple.
• D: It measures relative price changes between exports and imports, not just time-based change.

Final answer: C