What are the factors affecting the terms of trade?

Factors affecting a country's terms of trade (TOT) include exchange rates, relative inflation rates, global demand and supply (especially for commodities), productivity and technology, trade policies (tariffs/quotas), and income levels in trading partners, all influencing the ratio of export prices to import prices. An improvement occurs if export prices rise faster than import prices, while a deterioration happens if import prices increase more quickly.

What are the factors affecting terms of trade?

The document discusses the factors influencing a country's terms of trade (TOT), including demand and supply elasticities, market conditions, import substitutes, international capital flows, balance of payments, inflation and deflation.

What affects the terms of trade?

The terms of trade is affected by all factors influencing the price of internationally traded goods and services. Among those, two important factors are fluctuations in exchange rates and commodity prices, which are notoriously volatile.

What four factors influence a country's terms of trade?

Factors Influencing Terms of Trade

• Global commodity prices. Countries that are major exporters of commodities such as oil, metals, or agricultural goods are highly sensitive to shifts in global commodity prices. ...
• Exchange rate movements. ...
• Inflation rates. ...
• Productivity and technology. ...
• Trade policy.

What are the factors that influence trade?

International trade is influenced by many factors, including inflation, national income levels, government restrictions, exchange rates, geographical location, level of economic development, lack of restrictions on piracy, competitiveness, and globalization.

Factors that change the Terms of Trade

Which of the following influences the terms of trade?

Terms of Trade Influences

They include demand, supply, exchange rates, and changes in technology. Demand, in particular reciprocal demand, can be explained as the strength and elasticity of one country's demand for the other country's product.

What are the 7 barriers to international trade?

The document discusses different types of barriers to international trade, including cultural and social barriers, political barriers, tariffs and trade restrictions, boycotts, standards, anti-dumping penalties, and monetary barriers.

What are the 4 barriers of international trade?

There are several types of trade barriers, but the four main types are protective tariffs, import quotas, trade embargoes, and voluntary export restraints. A protective tariff is a tax imposed on imported goods, making them more expensive than domestic goods(Eg. customs duties) .

What are the 4 factors of the economy?

Four key factors are the key to economic development, namely human resources, natural resources, the establishment of physical capital and technology.

What determines the terms of trade?

Terms of trade reflect the relative price between a country's exports and imports, and are measured as the ratio of the export price index to the import price index. Terms of trade indicate whether a country can purchase more or fewer imports for the same amount of exports.

What are the three terms of trade?

There are several concepts of terms of trade, including net barter TOT (the basic ratio of export to import prices), gross barter TOT (the ratio of import and export quantities), and income TOT (net barter TOT multiplied by export quantity).

What are the 5 main economic indicators?

• Main Indicators.
• GDP Growth Rate.
• Interest Rate.
• Inflation Rate.
• Unemployment Rate.
• Government Debt to GDP.
• Balance of Trade.
• Current Account to GDP.

What can affect trade?

Export competitiveness, exchange rates, consumer demand, trade policies, economic growth, technological advancements, natural resources, population size, and workforce composition are some of the factors that can affect a nation's balance of trade.

What are the effects of terms of trade?

Effects of Terms of Trade Fluctuations on Economies

A rising TOT is beneficial because it means a country needs fewer exports to buy the same imports. It might also have a positive impact on domestic cost-push inflation when the TOT increases because the increase is indicative of falling import prices to export prices.

What are the five barriers to trade?

The main types of trade barriers used by countries seeking a protectionist policy or as a form of retaliation are subsidies, standardization, tariffs, quotas, and licenses. Each of these either makes foreign goods more expensive in domestic markets or limits the supply of foreign goods in domestic markets.

What are the 4 types of export?

The main types of export are direct export, indirect export, re-export, and temporary export. Direct export involves selling goods directly to foreign buyers, while indirect export involves selling through intermediaries.

What are the 4 factor markets?

The factor market, or resource market, is where resources to create products are bought and sold, including factors of production like natural resources, labor, capital, and entrepreneurship. Factor markets can include labor markets and land markets.

What factors can affect the economy?

Many economic factors, such as unemployment, exchange rates, inflation, wages, and supply and demand, typically impact how businesses make a profit and increase their efficiency. Companies that study these factors can usually predict consumer spending and plan their marketing efforts to improve performance.

What are the 4 main types of economics?

There are 4 main types of economic systems known as economies: a command economy, a market economy, a mixed economy and a traditional economy.

What are types of trade?

Types of Trade: Internal, External, Wholesale, Retail & More. Trade, an activity essential to any economic system, involves buying, selling, or exchanging goods and services. Trade links markets, encourages growth, and increases personal standards of living.

What are three major trade barriers?

The major obstacles to international trade are natural barriers, tariff barriers, and non-tariff barriers.

What are the five problems of international trade?

This article provides an in-depth analysis of common challenges in international trade and offers corresponding solutions.

• Tariff and Tax Issues. ...
• Legal and Compliance Issues. ...
• Logistics and Transportation Issues. ...
• Payment and Foreign Exchange Issues. ...
• Cultural and Language Barriers. ...
• Market Entry and Competition Issues.

What are the challenges of trade?

Tariffs and Protectionism

Developing countries are disproportionately affected, facing higher tariffs that limit their market access and competitiveness. Tariff escalation (higher tariffs on finished goods than raw materials) discourages industrialization in these economies, (UN Trade and Development, 2025).

What are the four types of international trade?

Table of content

• . ...
• Export Trade: Fueling Economic Growth and Global Connectivity.
• Import Trade: Bridging Gaps in Domestic Economies.
• Entrepôt Trade: Connecting Markets Through Re-Exportation.
• Trade in Services: Expanding Global Commerce Beyond Goods.
• Issues and Challenges of International Trade.

What are trade barriers?

A trade barrier refers to any regulation or policy that restricts international trade, especially tariffs, quotas, licences etc.