1d. Terms of trade

What is meant by: Terms of Trade Formula?

The terms of trade formula equals the index of export prices divided by the index of import prices, multiplied by 100.

What is meant by: Improvement in Terms of Trade?

An improvement in the terms of trade means that there has either been an increase in the index of export prices or a decrease in the index of import prices.

What is meant by: Deterioration in Terms of Trade?

A deterioration in the terms of trade means that there has either been a decrease in the index of export prices or an increase in the index of import prices.

What is meant by: Impact of Raw Material Prices on Terms of Trade?

An increase in raw material prices will deteriorate the terms of trade for countries who import raw materials and improve the terms of trade for countries who export raw materials.

What is meant by: Impact of Tariffs on Terms of Trade?

An increase in tariffs will deteriorate the terms of trade and a decrease in tariffs will improve the terms of trade.

What is meant by: Impact of Exchange Rates on Terms of Trade?

An exchange rate depreciation will deteriorate the terms of trade and an appreciation will improve the terms of trade.

What is meant by: Impact of Inflation Rates on Terms of Trade?

A low inflation rate relative to trading partners will deteriorate the terms of trade and a high inflation rate relative to trading partners will improve the terms of trade.

What is meant by: Impact of Terms of Trade on Living Standards?

An improvement in the terms of trade will increase living standards and a deterioration in the terms of trade will decrease living standards.

What is meant by: Impact of Terms of Trade on Competitiveness?

An improvement in the terms of trade will decrease competitiveness and a deterioration in the terms of trade will increase competitiveness.