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  Terms and Balance of Trade Homework Help

Terms of Trade

The rate at which one country’s goods are exchanged for those of other countries is referred to as the terms of trade. It is computed as a key.

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Balance of Trade

Balance of trade refers to the difference between the value of exports and imports.

Balance of trade = Value of exports – Value of imports

(goods) (goods)

If the value of exports exceeds that of imports, the balance of trade is favourable. On the other hand, if the value of imports exceeds that of exports, the balance of trade is unfavourable.

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