trade, terms of


trade, terms of

Relationship between the prices at which a country sells its exports and the prices paid for its imports. If a country's export prices rise relative to import prices, its terms of trade are said to have moved in a favourable direction, since, in effect, it now receives more imports for each unit of goods exported. The terms of trade, which depend on the world supply of and demand for the goods involved, indicate how the gains from international trade will be distributed among trading countries. An abrupt change in a country's terms of trade (e.g., a drastic fall in the price of its main export) can cause serious problems in its balance of payments. See also comparative advantage.

This entry comes from Encyclopædia Britannica Concise.
For the full entry on trade, terms of, visit Britannica.com.

Seen & Heard

What made you look up trade, terms of? Please tell us what you were reading, watching or discussing that led you here.

Get Our Free Apps
Voice Search, Favorites,
Word of the Day, and More
Join Us on FB & Twitter
Get the Word of the Day and More