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) inelastic demand for these products in advanced countries
B) sizable increases in the amount of these products supplied to the world market
C) weak demand for these products in advanced countries
D) all of the above

Question

Quizplus · Accepted Answer

All of the above reasons contribute to a long-run decline in international terms of trade for developing countries that primarily produce raw materials and agricultural goods. Inelastic demand means that price increases do not significantly decrease the quantity demanded, leading to stagnant prices despite increased supply. Increased supply from these countries also puts downward pressure on prices. Additionally, weak demand in advanced countries can further reduce prices and negatively impact the terms of trade for these developing countries.

Developing Countries That Emphasize Production in Raw Materials and Agricultural