terms of trade

      relationship between the prices at which a country sells its exports and the prices paid for its imports. If the prices of a country's exports rise relative to the prices of its imports, one says that its terms of trade have moved in a favourable direction, because, in effect, it now receives more imports for each unit of goods exported. The terms of trade, which depend on the world supply of and demand for the goods involved, indicate how the gains from international trade will be distributed among trading countries. The concept is also applied to different sectors within an economy (e.g., agricultural and manufacturing sectors).

      An abrupt change in a country's terms of trade (e.g., a drastic fall in the price of a primary product that is a country's main export) can cause serious balance-of-payments (balance of payments) problems if the country depends on the foreign exchange earned by its exports to pay for the import of its manufactured goods and capital equipment.

      Many theories have been postulated to explain movements in the terms of trade, but none of them is really confirmed by close examination of trade statistics. One long-held belief was that the terms of trade tended to move against less-developed countries because their exports consisted chiefly of primary products (such as coffee or rubber) while their imports largely comprised manufactured and, consequently, more-expensive goods from developed countries. More-recent studies have examined what effects labour inflows (through immigration) and capital inflows (through foreign investment) might have on a country's terms of trade.

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Universalium. 2010.

Look at other dictionaries:

  • Terms of Trade —   [təːmz əv treɪd, englisch], Maßzahl für die reale Austauschposition eines Landes im internationalen Handel, im Allgemeinen ausgedrückt durch das Verhältnis des Index der Ausfuhrpreise zum Index der Einfuhrpreise jeweils in der Währung des… …   Universal-Lexikon

  • Terms of Trade — [ treid] die (Plur.) <aus engl. terms of trade »Handelsbedingungen«> die Austauschrelation zwischen den Import u. Exportgütern eines Landes (Wirtsch.) …   Das große Fremdwörterbuch

  • Terms of Trade — Der Begriff Terms of Trade (TOT) bzw. Einfuhrtauschverhältnis oder Realaustauschverhältnis bezeichnet eine volkswirtschaftliche Maßzahl für das reale Austauschverhältnis zwischen den exportierten und den importierten Gütern eines Landes. Dabei… …   Deutsch Wikipedia

  • Terms of trade — In international economics and international trade, terms of trade or TOT is the relative prices of a country s export to import. Terms of trade are sometimes used as a proxy for the relative social welfare of a country, but this heuristic is… …   Wikipedia

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  • Terms of trade — The weighted average of a nation s export prices relative to its import prices. The New York Times Financial Glossary * * * terms of trade UK US noun [plural] ► ECONOMICS the value of a country s exports compared with the value of its imports:… …   Financial and business terms

  • terms of trade — The weighted average of a nation s export prices relative to its import prices. Bloomberg Financial Dictionary * * * terms of trade UK US noun [plural] ► ECONOMICS the value of a country s exports compared with the value of its imports: »The… …   Financial and business terms

  • terms of trade — the ratio between the prices of two countries participating in international trade * * * terms of trade plural noun Relation between export and import prices in national accounts • • • Main Entry: ↑term * * * terms of trade UK US noun [plural]… …   Useful english dictionary

  • terms of trade — A measure of the trading prospects of a country expressed as an index of export prices divided by an index of import prices. A country s terms of trade improve if this ratio rises, because it can purchase more imports for a particular volume of… …   Big dictionary of business and management

  • terms of trade — UK / US noun [plural] business a measurement of a country s position in international trade, which compares the prices of the goods it sells to other countries with the prices of the goods it buys from other countries …   English dictionary

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