Trends in Terms of Trade | A Perspective of USA and China

TRENDS IN TERMS OF TRADE:
A perspective of USA and China

What is Terms of Trade?
• Terms of trade in an international economic concept that
is essential in determining the state of the economy of a
country through carrying out its business activities,
• These business activities can be summed up to a
county’s exports and.
• Therefore, Tot basically means the rate at which a
country’s exports exchange for its imports

How do we measure terms of trade?
• By dividing an index of export prices by an index
of import prices.
• If the terms of trade index goes up, we say that the
terms of trade have improvedRees 2017).
• If the index falls, we say that the terms of trade have
deteriorated

LIMITATIONS?
• Relative changes or export volumes between
countries it not effectively depicted by the terms of
trade calculations
• Its not effective t for TOT to be synonymously used
with pareto social economic or even social welfare