Terms of trade

Terms of trade refer to the rate at which one country's goods or services can be exchanged for those of another country. It essentially measures the relative value of exports to imports over time. When terms of trade improve, a country can buy more imports with the same amount of exports, indicating better economic standing. Conversely, worsening terms of trade mean the country must give up more exports to get the same amount of imports. It reflects the health of a country's trading relationships and influences national income and living standards.