The terms of trade (TOT) are: A) P_m / P_x. B) P_x / P_m. C) Price of Tradable goods / price of nontradable goods. D) value / weight. E) weight / value.

Question

Quizplus · Accepted Answer

The terms of trade (TOT) are typically defined as the ratio of the price of exports to the price of imports. Therefore, none of the given options accurately define the term. However, option C comes closest by suggesting it's the ratio of the price of tradable goods to the price of nontradable goods. This is somewhat similar, but not exactly the same as the standard definition of TOT.

The Terms of Trade (TOT) Are