Which of the following is true, according to the Prebisch-Singer hypothesis?
A) Trade surpluses help reduce the price volatility of industrial goods.
B) Commodity prices are directly proportionate to industrial output.
C) Industrial goods do not move as quickly when commodity prices are volatile.
D) Commodity prices earn less over time than industrial goods prices.
E) Industrial goods prices are more volatile than commodity prices.

Question

Quizplus · Accepted Answer

The Prebisch-Singer hypothesis suggests that over time, the prices of commodities (such as agricultural goods and raw materials) tend to decline relative to the prices of manufactured goods and industrial products. This is due to various factors, including technological advancements in manufacturing and the inelastic demand for commodities, leading to a deterioration in the terms of trade for countries that primarily export commodities.

Which of the Following Is True, According to the Prebisch-Singer