Several Economists Have Hypothesized That the Terms of Trade for Developing

question 196

Multiple Choice

Several economists have hypothesized that the terms of trade for developing countries will decline over time. Which of the following might be a cause of this decline?

• A) Technological progress in manufactured goods has caused their prices to fall.
• B) Some developing countries are able to keep the price of their exports high by restricting supplies on the world market.
• C) Increased demand for developing country exports has caused prices of developing country exports to rise.
• D) The demand for primary product exports from developing countries has not risen as fast as the demand for manufactured exports of industrialized countries.

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Definitions:

Accruals

The accounting practice of recording revenues and expenses when they are incurred, regardless of when cash transactions happen.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health and ability to cover short-term liabilities.

Dividend Yield

The ratio of a company's annual dividends per share to its current share price, indicating how much an investor gets back relative to the share price.

Working Capital Accruals

The portion of earnings not realized in cash, representing changes in working capital that affect a company's cash flow.