Terms of Trade - TOT


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).

BREAKING DOWN '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.

  1. Absolute Advantage

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

    An advantage that a firm has over its competitors, allowing it ...
  3. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  4. Comparative Advantage

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

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

    A good or service brought into one country from another. Along ...
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