$$ Terms\ of\ Trade = \fracAverage\ export\ price\ indexAverage\ import\ price\ index \times 100 $$ If the result > 100, the country is better off (exports buy more imports).
Formulas:
Deep Dive & Exam Logic:
The booklet gives $%\Delta = (New-Old)/Old$. But for PED, the IB often wants the midpoint method. Solution: Read the command term. If it says "calculate using the average method," use the secondary formula in Section 1.1. If it says "calculate the percentage change," use the booklet's primary formula.
First, a crucial distinction. Unlike Physics or Mathematics HL, the Economics HL formula booklet is not a massive, intimidating tome. It is a slim, two-to-three-page document provided by the IBO specifically for the Paper 3 examination. ib economics hl formula booklet
Key facts:
The beauty of the booklet is that you do not need to memorize complex formulas. You need to memorize how to use the booklet. $$ Terms\ of\ Trade = \fracAverage\ export\ price\
| Concept | Formula |
|---------|---------|
| GDP (expenditure) | C + I + G + (X − M) |
| GNI | GDP + Net income from abroad |
| Inflation rate | (CPI_new − CPI_old) / CPI_old × 100 |
| Unemployment rate | (Unemployed / Labour force) × 100 |
| Labour force | Employed + Unemployed |
| Multiplier | 1 / (1 − MPC) or 1 / (MPW) (MPW = MPS + MPT + MPM) |
| Output gap | (Actual GDP − Potential GDP) / Potential GDP × 100 |
The booklet provides the Quantity Theory of Money (Fisher Equation) : $$ MV = PY $$ Where: Deep Dive & Exam Logic:
HL Application: If $M$ grows by 10% and $Y$ grows by 3%, calculate inflation.
Get a markscheme for Paper 3 (HL only, quantitative paper). For each calculation question, cover the answer. Use only the booklet to solve. Then check. You’ll quickly learn which formulas appear most often — typically: