Terms of Trade - TOT

AAA

DEFINITION of 'Terms of Trade - TOT'

The value of a country's exports relative to that of its imports. It is calculated by dividing the value of exports by the value of imports, then multiplying the result by 100. If a country's terms of trade (TOT) is less than 100%, there is more capital going out (to buy imports) than there is coming in. A result greater than 100% means the country is accumulating capital (more money is coming in from exports).

INVESTOPEDIA EXPLAINS 'Terms of Trade - TOT'

Using the terms of trade to determine the health of a country's economy can draw the wrong conclusions. It is important to know why exports increase relative to imports, especially since the terms of trade are directly impacted by changes in export and import prices. Terms of trade measurement is often recorded in an index for economic monitoring.

RELATED TERMS
  1. Absolute Advantage

    The ability of a country, individual, company or region to produce ...
  2. Comparative Advantage

    The ability of a firm or individual to produce goods and/or services ...
  3. Export

    A function of international trade whereby goods produced in one ...
  4. Import

    A good or service brought into one country from another. Along ...
  5. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  6. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
Related Articles
  1. What Is International Trade?
    Personal Finance

    What Is International Trade?

  2. 6 Factors That Influence Exchange Rates
    Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

  3. Cashing In On A Commodities Boom
    Trading Strategies

    Cashing In On A Commodities Boom

  4. Understanding World Bank Data
    Investing

    Understanding World Bank Data

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center