Definition: Terms of trade is an index of the price of a country's exports in terms of its imports. The
terms of trade are said to improve if that index rises. (Obstfeld and
Rogoff, p 25)
An analogous use is when comparing relative prices. If the cost of agricultural goods in terms of industrial goods goes up, one might say the "terms of trade ... shifted in favor of agricultural products." (North and Thomas, p 108).
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