Explain each of the following terms:
(a) Export promotion
(b) Depreciation
(c) Terms of trade
(d) Balance of trade.
Explanation
(a) Export Promotion; is any policy by which govern-ments encourage producers of export goods to pro-duce and export more to earn more foreign exchange.
(b) Depreciation: Refers to the fall in the value of coun-try's currency against other currencies as a result of the interplay of the forces of demand and supply.
(c) Terms of trade: Refers to the rate which a country's exports exchange for imports.
OR
Terms of trade = index of export prices x 100
index of import prices
A country's terms of trade are said to improve when this ratio increases and to worsen when it decreases.
(d) Balance of trade: Refers to the total value of goods sold and bought by a country during a given period, usually a year. When visible exports equal visible im-ports in money terms we have balance of trade. A posi-tive balance of trade means that a country is export-ing more in money terms than it is importing while a negative or unfavourable balance of trade means that a country is import more in money terms than it is exporting.