Unit X- BOP

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Unit VI - Terms of trade : 

Unit VI - Terms of trade Day and Date:

Unit Highlights… : 

Unit Highlights… Terms of trade Factors affecting terms of trade

Text book reference chapters… : 

Text book reference chapters… International Economics by Dominick Salvatore – Chapter 4 & 11 International Economics by Francis Cherunilam – Chapter 7

Terms of Trade…concept : 

Terms of Trade…concept Ratio of the price of its export commodity to the price of its import commodity.

Terms of Trade…types : 

Terms of Trade…types Commodity/net barter terms of trade Gross barter terms of trade Income terms of trade Single factorial terms of trade Double factorial terms of trade

Terms of Trade…Commodity/net barter terms of trade : 

Terms of Trade…Commodity/net barter terms of trade The ratio (expressed as a percentage) of relative export and import prices when volume is held constant.

Terms of Trade… Gross barter terms of trade : 

Terms of Trade… Gross barter terms of trade The ratio (expressed as a percent) of a quantity index of exports to a quantity index of inputs.

Terms of Trade…Income terms of trade : 

Terms of Trade…Income terms of trade The ratio (expressed as a percent) of the value of exports to the price of imports.

Terms of Trade… Single factorial terms of trade : 

Terms of Trade… Single factorial terms of trade Net barter terms of trade adjusted for changes in the productivity of exports.

Terms of Trade… double factorial terms of trade : 

Terms of Trade… double factorial terms of trade This adjusts for both the productivity of exports and the productivity of imports.

Factors affecting Terms of Trade : 

Factors affecting Terms of Trade Dependency on foreign sourcing Relative competitiveness in production PESTLE aspects of business environment - intra-country and the rest of the world

To conclude… : 

To conclude… Economic efficiency is enhanced when nations engage in mutually beneficial exchange.

You should now be able to, : 

You should now be able to, Explain the concept and types of terms of trade. Identify factors that determine favorable terms of trade.

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