Developing countries that concentrate production in agricultural products or raw materials may face a long-run decline in their international terms of trade because of ?
Correct answer: D. All of the above
- A. inelastic demand for these products in advanced countries
- B. large increases in the supplies of these products on world markets because of export expansion policies
- C. sluggish demand for these products in advanced countries
- D. All of the above
Explanation
Agricultural commodities and raw materials often have sluggish or income-inelastic demand, while export expansion can increase world supply and depress prices. These forces together can worsen the long-run terms of trade, making all of the listed factors relevant.
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