Terms of trade
From ACT Wiki
Jump to navigationJump to search
1. Trade finance.
The basis on which a vendor sells its goods or services, typically referring to the credit and payment terms.
2. Macroeconomics.
(TOT).
In the macroeconomic context, terms of trade are defined as the ratio between the index of export prices and the index of import prices.
If export prices increase more than import prices, a country has a positive terms of trade. For the same amount of exports, the country can purchase more imports.
But if import prices increase more than export prices, the opposite applies, and the country has negative terms of trade.
