The economic indicator measuring the ratio of a country’s export prices to its import prices is its terms of trade.
The standard formula is the export price index divided by the import price index, often multiplied by 100. If export prices rise relative to import prices, the terms of trade improve: a country can obtain more imported goods for a given quantity or value of exports. If import prices rise faster, the measure deteriorates.
For a simple example, imagine a country exports apples and imports oranges. Its terms of trade compare the price of apples with the price of oranges. Real economies export and import thousands of products, so statistical agencies use weighted price indexes rather than one pair of goods.
Terms of trade is not the same as a trade balance or trade deficit. A trade balance compares the value or volume of exports and imports, while terms of trade compares their prices. Nor is it purchasing power parity, which concerns relative price levels and exchange rates. An improvement can raise purchasing power, but it does not automatically mean higher living standards, because quantities traded, productivity, and income distribution also matter.