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. A Primer On Reserve Currencies
    Economics

    A Primer On Reserve Currencies

comments powered by Disqus
Hot Definitions
  1. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center