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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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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