Terms of Trade Flashcards
1
Q
Terms of Trade Definition
A
Relative price of a country’s exports compared to the cost of imported goods and services
2
Q
Terms of Trade Index Formula
A
Price index for Exports / Price index for Imports
3
Q
What does a rise in the price index for exports mean
A
Country can buy more imports for any given level of exports
4
Q
What does an improvement in the terms of trade mean
A
Export prices are rising relative to import prices
5
Q
Factors influencing the terms of trade
A
Global prices for raw materials and components
The exchange rate
Import tariffs and other trade barriers such as quotas
