Terms of Trade | Notes
Terms of Trade (ToT) refers to the ratio of Price of exportable goods to the Price of importable goods. If a country terms of trade is more than 100%, it means that the country exports is more than it imports and that capital is coming in. If a country terms of trade (TOT) is less than 100%, then there is more capital going out the country needs to buy more products outside. The terms of trade ratio is heavily influenced by changes in the exchange rate because a rise in the value of a country domestic currency decreases prices for its imports but also makes exports less competitive.