Q1:Explain the arguments supporting the deterioration of terms of trade of devel
ID: 1125683 • Letter: Q
Question
Q1:Explain the arguments supporting the deterioration of terms of trade of developing countries in the long run. What are terms of trade? What do you think about the validity of these arguments? Q2: What are the main challenges of developing countries that export manufactured goods? Hint: In terms of labor/ capital intensity,what type of manufactured goods would these countries export? By "challenges", I mean: - In order to export these products, what policies do these countries need to implement? and - Are the importers of these manufactured products open to this type of international trade? Why yes or why not?Explanation / Answer
The term of trade refers to rates at on country is exchanged for products of the other country, the terms of trade are said to be deteriorated when country's import price increase and export value remains the same.
When trade takes Developed and Developing countries there arise problem of deterioration in terms of trade because developing counties generally export labour intensive goods and imports capital-intensive goods from the developed counties which makes import more expensive and export value remains the same
2) Generally, developing countries will export labour intensive goods these are in the form of manufactured goods such as agricultural products, creative crafts much more by giving subsidies or encouraging export promotion activities Government can improve these exporting goods
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