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What does the trade-to-GDP ratio measure? Does a low value indicate that a country is closed...

What does the trade-to-GDP ratio measure?

Does a low value indicate that a country is closed to trade with the outside world?

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Answer #1

Trade-to-GDP ratio refers to the ratio of the value of total trade (import and export) and total GDP of an economy in a given year. So, trade-to-GDP ratio = value of total trade/value of total GDP.

Trade-to-GDP ratio indicates the relative importance of international trade in an economy. Higher trade to GDP ratio indicates that the country is relatively open to the rest of the world as the total volume of trade of the economy is relatively high. On the other hand, a lower trade to GDP ratio indicates that the country is relatively close to the rest of the world as the total volume of trade of the economy is relatively less.

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