IB Economics/International Economics/Terms of trade

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Terms of Trade[edit | edit source]

  • definition of terms of trade: Index of export prices/ index of import prices × 100
  • Consequences of a change in the terms of trade for a country's balance of payments and domestic economy
  • The significance of deteriorating terms of trade for developing countries
  • Measurement of terms of trade
  • Causes of changes in country's terms of trade in the short-run and long-run
  • Elasticity of demand for imports and exports
  • Possible inverse relationship between Terms of Trade and Balance of Payments - depends on elasticity for imports and exports (Price and Income elasticities)