Developing countries that emphasize production in raw materials and agricultural goods may realize a long-run decline in their international terms of trade as the result of
A) an inelastic demand for these products in advanced countries.
B) a sizable decrease in the amount of these products supplied to the world market.
C) an increased demand for these products in advanced countries.
D) an elastic demand for these products in advanced countries.

Question

Quizplus · Accepted Answer

Developing countries that rely heavily on the production of raw materials and agricultural goods may face a long-term decline in their international terms of trade if there is an inelastic demand for these products in advanced countries. This means that even if developing countries decrease their supply of these products to the world market, the demand for them in advanced countries will not decrease proportionately, leading to a decline in their terms of trade.

Developing Countries That Emphasize Production in Raw Materials and Agricultural