The Prebisch-Singer hypothesis concludes that:
A) because of unfair trading practices, labor in developing countries is exploited.
B) developing countries experience a long-run decline in their terms of trade, as the demand for primary products in higher-income countries declines relative to their demand for manufactured goods.
C) OPEC has been responsible for a slowdown in the world's standard of living.
D) technology lowers the cost of manufactured products, so developing countries should see an increase in their terms of trade.

Question

Quizplus · Accepted Answer

The Prebisch-Singer hypothesis, developed by economists Raúl Prebisch and Hans Singer, suggests that over time, developing countries experience a decline in their terms of trade. This means that the prices of the primary commodities they export (like agricultural products or natural resources) fall relative to the prices of manufactured goods they need to import. This can lead to a persistent current account deficit, making it harder for developing countries to accumulate wealth and improve living standards. The hypothesis suggests that this decline is due to structural factors in the global economy, including technological progress that lowers the cost of manufactured goods, and trade policies that favor developed countries.

The Prebisch-Singer Hypothesis Concludes That