Terms of Trade (ToT) is defined as the ratio of export prices to import prices. It measures the relative purchasing power of a country's exports in terms of its imports.

An improvement in ToT means that a country can either import more goods for the same amount of exports or export more goods for the same amount of imports.

A deterioration in ToT means that a country can either import less goods for the same amount of exports or export less goods for the same amount of imports.

An improvement in ToT can be caused by an increase in demand for a country's exports, a decrease in demand for a country's imports, an increase in the supply of a country's exports, or a decrease in the supply of a country's imports.

A deterioration in ToT can be caused by a decrease in demand for a country's exports, an increase in demand for a country's imports, a decrease in the supply of a country's exports, or an increase in the supply of a country's imports.

An improvement in ToT leads to a trade surplus because a country can export more goods for the same amount of imports. A deterioration in ToT leads to a trade deficit because a country can import less goods for the same amount of exports.

An improvement in ToT leads to higher economic growth because a country can import more capital goods and raw materials for the same amount of exports. A deterioration in ToT leads to lower economic growth because a country can import less capital goods and raw materials for the same amount of exports.

A country that exports more goods than it imports has a favorable ToT because it can import more goods for the same amount of exports.

A country that imports more goods than it exports has an unfavorable ToT because it can import less goods for the same amount of exports.

A country can improve its ToT by increasing the supply of its exports, decreasing the demand for its imports, and negotiating trade agreements with other countries.

A favorable ToT leads to higher economic development because a country can import more capital goods and raw materials for the same amount of exports. An unfavorable ToT leads to lower economic development because a country can import less capital goods and raw materials for the same amount of exports.

China has a favorable ToT because it exports more goods than it imports.

The United States has an unfavorable ToT because it imports more goods than it exports.

A country can protect itself from a deterioration in ToT by imposing tariffs on imports, providing subsidies to exporters, and negotiating trade agreements with other countries.

The role of government in managing ToT is to ensure that ToT is favorable to the country, to protect domestic industries from foreign competition, and to promote exports and discourage imports.