This term denotes the amount of a country’s exports that are exchanged for its imports.
FAVOURABLE TERMS OF TRADE – This is when the prices of a country’s exports is greater than her imports.
UNFAVOURABLE TERMS OF TRADE – This is when the prices of a country’s exports is less to that of her imports.
BALANCE OF TRADE: This is the relationship between the total value of visible exports and that of imports. Note that if the value of visible exports is greater than that of imports, the balance of trade is said to be favourable. Conversely, if the value of visible imports is greater than that of visible exports, then the balance of trade is said to be unfavourable. This situation can be upset by a surplus in invisible items. But if the value of visible imports is equal to that of visible exports, then, there is a balance of trade.
However, visible exports and imports are referred to as tangible goods. That is, they are physical goods that we can see and touch. While invisible exports and imports are intangible. They refer to services such as shipping, banking, insurance and tourism charges.
BALANCE OF PAYMENT: Is the relationship between a country’s total payments to other countries and its total receipts from those countries, A country’s balance of payments consists of the balance of payment on current and capital account.
CURRENT ACCOUNT -Deals with payments and receipts for goods and services it shows the income and expenditure on both visible and invisible trade.
CAPITAL ACCOUNT – Deals with payments and receipts for services rendered to a country by another country. It shows the actual transfer of money from one country to the other through private (individual) and official (government) capital investments FAVOURABLE BALANCE OF PAYMENTS – This is when a country’s total payments is less to her total receipts That is, when total receipts is greater than payments.
UNFAVOURABLE BALANCE OF PAYMENTS – This occurs when a country’s total payment is equal to the total receipts
BALANCED BALANCE OF PAYMENT: This occurs when a country’s total payment is equal to the total receipts.