Developing countries that emphasize the production of raw materials or agricultural goods may realize a long-run deterioration in the international terms of trade because of ?
Correct answer: D. sluggish demand for these products in advanced countries
- A. relatively low import tariffs maintained by advanced countries
- B. highly elastic demand for these products in advanced countries
- C. declines in the supplies of these products on world markets
- D. sluggish demand for these products in advanced countries
Explanation
Raw materials and agricultural commodities often face sluggish or slowly growing demand in advanced economies, while productivity can increase their supply. This combination can depress their relative prices and cause long-run deterioration in the terms of trade.
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