terms of trade

the changing overall ratio of the prices (or VALUES) a country must pay for the goods and services it imports and the prices (or values) it is able to obtain for the goods and services it exports. This is usually measured by a quotient obtained by dividing an index number of the prices of goods and services sold by an index number of those obtained. In recent decades, a deterioration in the terms of trade between developed and less developed countries has posed a persistent problem for the latter, brought about by, e.g.:

the substitution of agricultural products by synthetic, industrially produced replacements; and
the ‘income elasticity’ (see ELASTICITY OF SUPPLY AND DEMAND) for foodstuffs (i.e. people in developed societies can eat only so much food). Efforts to overcome the problem of adverse terms of trade for many of the goods produced by poorer countries include the diversification of their pattern of production for international markets, but this, if it can be achieved at all, is a long-term process in which some developing nations (e.g. those richer in natural resources, and achieving relative political stability) are more successful than others. See also INTERNATIONAL TRADE, UNEQUAL EXCHANGE.

terms of trade

Terms of trade

The weighted average of a nation's export prices relative to its import prices.

Terms of Trade

1. The conditions the parties agree to follow in the trade of a security. Necessary terms of trade include the price and the number of shares or bonds traded. The terms of trade may also include special conditions.

2. In international trade, the difference between price indices on imports and exports.

3. See: Balance of trade.

Fig. 183 Terms of trade. See entry. Source: Office for National Statistics, 2004.

terms of trade

a PRICE INDEX that shows a country's EXPORT prices relative to its IMPORT prices. It is constructed by taking an index of prices received for exports, on the one hand, and an index of prices paid for imports, on the other, and then dividing the first by the second (see Fig. 183 ). An improvement in a country's terms of trade occurs if its export prices rise at a faster rate than import prices over time and a worsening of the terms of trade if export prices rise more slowly than import prices; or, vice-versa, if export prices fall at a slower rate than import prices (as in Fig. 183), then the terms of trade are improved.

Superficially, an improvement in a country's terms of trade may be considered to be beneficial: in foreign-exchange terms, a given amount of exports will now finance the purchase of a greater amount of imports, or, put another way, a given amount of imports can now be purchased for a smaller amount of exports. A critical factor in this regard, however, is the PRICE- ELASTICITY OF DEMAND for exports and imports. If, for example, export demand is price-elastic, then price rises (which make the country's exports less competitive in world markets) will result in a more than proportionate fall in export volume, thus lowering foreign-exchange receipts and adversely affecting domestic output and employment. See also BALANCE OF PAYMENTS EQUILIBRIUM, DEVALUATION, REVALUATION.

单词	terms of trade
释义	terms of trade terms of trade pl n (Economics) economics Brit the ratio of export prices to import prices. It measures a nation's trading position, which improves when export prices rise faster or fall slower than import prices terms of trade The agreed conditions under which business is done. terms of trade terms of trade the changing overall ratio of the prices (or VALUES) a country must pay for the goods and services it imports and the prices (or values) it is able to obtain for the goods and services it exports. This is usually measured by a quotient obtained by dividing an index number of the prices of goods and services sold by an index number of those obtained. In recent decades, a deterioration in the terms of trade between developed and less developed countries has posed a persistent problem for the latter, brought about by, e.g.: the substitution of agricultural products by synthetic, industrially produced replacements; and the ‘income elasticity’ (see ELASTICITY OF SUPPLY AND DEMAND) for foodstuffs (i.e. people in developed societies can eat only so much food). Efforts to overcome the problem of adverse terms of trade for many of the goods produced by poorer countries include the diversification of their pattern of production for international markets, but this, if it can be achieved at all, is a long-term process in which some developing nations (e.g. those richer in natural resources, and achieving relative political stability) are more successful than others. See also INTERNATIONAL TRADE, UNEQUAL EXCHANGE. terms of trade Terms of trade The weighted average of a nation's export prices relative to its import prices. Terms of Trade 1. The conditions the parties agree to follow in the trade of a security. Necessary terms of trade include the price and the number of shares or bonds traded. The terms of trade may also include special conditions. 2. In international trade, the difference between price indices on imports and exports. 3. See: Balance of trade. Fig. 183 Terms of trade. See entry. Source: Office for National Statistics, 2004. terms of trade a PRICE INDEX that shows a country's EXPORT prices relative to its IMPORT prices. It is constructed by taking an index of prices received for exports, on the one hand, and an index of prices paid for imports, on the other, and then dividing the first by the second (see Fig. 183 ). An improvement in a country's terms of trade occurs if its export prices rise at a faster rate than import prices over time and a worsening of the terms of trade if export prices rise more slowly than import prices; or, vice-versa, if export prices fall at a slower rate than import prices (as in Fig. 183), then the terms of trade are improved. Superficially, an improvement in a country's terms of trade may be considered to be beneficial: in foreign-exchange terms, a given amount of exports will now finance the purchase of a greater amount of imports, or, put another way, a given amount of imports can now be purchased for a smaller amount of exports. A critical factor in this regard, however, is the PRICE- ELASTICITY OF DEMAND for exports and imports. If, for example, export demand is price-elastic, then price rises (which make the country's exports less competitive in world markets) will result in a more than proportionate fall in export volume, thus lowering foreign-exchange receipts and adversely affecting domestic output and employment. See also BALANCE OF PAYMENTS EQUILIBRIUM, DEVALUATION, REVALUATION. AcronymsSeeTOT
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