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 Form 4 Business studies lessons and notes on international trade

Meaning of terms of trade,balance of trade and balance of payment.

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Answer Text:
Terms of trade,balance of trade, balance of payment.
Terms of trade:
-refers to the rate at which a countryโ€™s export exchange against her imports.
-if they are greater than one, they are said to be favourable and if they are less than one they are said to be unfavourable.
Terms of trade=๐‘๐‘Ÿ๐‘–๐‘๐‘’ ๐‘–๐‘›๐‘‘๐‘’๐‘ฅ ๐‘œ๐‘“ ๐‘’๐‘ฅ๐‘๐‘œ๐‘Ÿ๐‘ก๐‘ ๐‘๐‘Ÿ๐‘–๐‘๐‘’ ๐‘–๐‘›๐‘‘๐‘’๐‘ฅ ๐‘œ๐‘“ ๐‘–๐‘š๐‘๐‘œ๐‘Ÿ๐‘ก๐‘ 
Balance of trade:
-refers to the difference between the value of visible exports and visible imports of a country over a given period of time.
-it is favourable if the value of visible exports exceeds value of visible imports and vice versa.
Balance of payment(BOP):
-refers to a summary statement showing all economic transactions that take place between a country and the rest of the world over a given period of time.
-favorable if total receipts are greater than total payments and vice versa.
Balance of payment disequilibrium:
-it occurs when receipts and payments are not equal resulting to surplus or deficit balance of payment.
Surplus balance of payment:
-it occurs when a countryโ€™s receipts are greater than payments in a particular year, the balance of payment is referred to as surplus


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