What is meant by deterioration in terms of trade and for what reason may this occur?

Answer 1

A deterioration in terms of trade is when a countries export prices decrease as compared to its import prices when comparing the current year with a base year. This may happen for a number of reasons including, but not limited to, a fall the the value of the currency on foreign markets (aka a devaluation of the currency) When a currency is devaluated, the price of the exports on the foreign markets appear cheaper and at the same time the imports appear more expensive. [this is for explanation only and not to be plagiarized and copied for an assignment] Therefore, the country would have to try and sell more of its exports in order to buy the same amount of imports. (ask if you want the effects of it on the economy) Another reason for this may be that the inflation rates in other countries have increased at a higher rate than in the country being discussed.[this is for explanation only and not to be plagiarized and copied for an assignment] This would make the imports from those countries more expensive and would lead to a deterioration in the terms of trade) A government subsidizing export goods would also make them cheaper on the foreign market. There are so many reasons it could happen but these are a few basic ones.