Which of the following trade theories asserts that within the outer limits of the terms of trade, the actual terms of trade is determined by the relative strength of each country's demand for the other country's product?
A) theory of reciprocal demand
B) overlapping demand theory
C) theory of income determination
D) theory of negative externalities

Question

Quizplus · Accepted Answer

The theory of reciprocal demand asserts that within the outer limits of the terms of trade, the actual terms of trade is determined by the relative strength of each country's demand for the other country's product. This theory emphasizes the importance of consumer preferences in determining the terms of trade between countries. Therefore, the correct option is A.

Which of the Following Trade Theories Asserts That Within the Outer