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People also ask
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What is the trade theory of theory?
The aim of Trade Theory is to explain the existing patterns of trade, the impact on the domestic economy, and the type of public policies that should be introduced to increase a country's well-being.
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What determines the terms of trade?
Terms of trade are defined as the ratio between the index of export prices and the index of import prices. If the export prices increase more than the import prices, a country has a positive terms of trade, as for the same amount of exports, it can purchase more imports.
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What are the factors affecting terms of trade?
Terms of Trade Influences There are several factors in existence that influence the terms of trade. 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.
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What are the effects of terms of trade?
An increase in the TOT can thus be beneficial because the country needs fewer exports to buy a given number of 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.
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What are the factors affecting the terms of trade?
There are several factors in existence that influence the terms of trade. 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.
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What is the concept and measurement of terms of trade?
Terms of trade are defined as the ratio between the index of export prices and the index of import prices. If the export prices increase more than the import prices, a country has a positive terms of trade, as for the same amount of exports, it can purchase more imports.
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What are the five factors affecting trade?
A country's balance of trade is defined by its net exports (exports minus imports) and is thus influenced by all the factors that affect international trade. These include factor endowments and productivity, trade policy, exchange rates, foreign currency reserves, inflation, and demand.
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What is the terms of trade a measure of?
Terms of trade (TOT) represent the ratio between a country's export prices and its import prices. TOT indexes are defined as the value of a country's total exports minus total imports.
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