Explanation:

Terms of trade (TOT) refers to the relative price of exports interms of imports. It can be interpreted as the amount of import goods aneconomy can purchase per unit of export goods.
• An improvement of a nation's terms of trade benefits that countryin the sense that it can buy more imports for any given level ofexports.
• The terms of trade may be influenced by the exchange rate because a rise in the value of a country's currency lowers the domestic prices of its imports but may not directly affect the prices of the commodities it exports.
• When the term ToT is used for economic sectors, like agriculture or industry, it refers to the ratio of general product prices in boththese sectors.
If agricultural prices are too low compared to industrialsector, it will lead to:
• Low income for farmers and poor living standard
• Low incentive to invest in agriculture
• Reduced output
• It will further reduce demand for industrial products
On the other hand, a favourable ToT will improve farmer’s income andinvestment in agriculture, thereby leading to agricultural growth.
However, too large a ToT will adversely affect industrial growth sinceindustries will have to pay higher food wages to the workers.