What do empirical studies show regarding the hypothesis of long-term deterioration in developing nations' terms of trade ?
Show answer Hide answer
Answer: A. mixed evidence that does not substantiate the deterioration hypothesis
Explanation
Empirical investigations across multiple decades yield highly varied results regarding long-term terms of trade. Data limitations and differing index methodologies prevent researchers from confirming a universal downward trend. The Prebisch Singer hypothesis lacks definitive statistical consensus due to conflicting evidence from various commodity groups. The terms of trade measure the relative price of a country exports compared to its imported goods. The hypothesis suggests developing nations face a secular decline in export prices relative to manufactured imports. Researchers analyze historical price indices for primary commodities and manufactured goods to test trade theories.
Trade policy debates often hinge on whether developing countries genuinely suffer from structural terms of trade disadvantages. International commodity agreements rely on empirical assessments of price trends to justify market interventions. Nations evaluate trade integration strategies based on historical price movements and empirical economic research. Option B incorrectly claims that statistical tests universally confirm the long-term deterioration hypothesis. Option C is wrong because numerous studies do find partial support for deterioration in specific commodity sectors. Option D is incorrect since valid empirical evaluations exist and are categorized within the mixed evidence findings.
Related questions
Q1. Which principle generally does NOT apply to a government's trade policy ?
Show answer Hide answer
Answer: B. because domestic consumers outnumber domestic producer’s policy markers usually enact Free-trade policies to satisfy the consumer majority:
Because consumers vastly outnumber domestic producers, the claim that policymakers naturally enact free-trade policies to satisfy the consumer majority contradicts historical political economy. Special interest groups re...
Q2. What do buy national policies entail ?
Show answer Hide answer
Answer: A. result in government purchase policies favoring domestic over foreign producers
Buy national policies direct government procurement processes to favor domestic producers over foreign competitors consistently. Governments implement these purchasing rules to stimulate domestic industrial growth and su...
Q3. Why do central banks in less developed countries have a weaker impact on expenditure and output ?
Show answer Hide answer
Answer: D. I, II , III and IV
Developing nations often feature informal financial markets that restrict monetary policy transmission channels. Lower financial integration prevents central bank policy rate adjustments from significantly impacting over...
Q4. Who owns private sector companies ?
Show answer Hide answer
Answer: B. Shareholders
Private sector companies are owned by shareholders who hold equity shares in the corporation.
Q5. Why is collusion difficult for an oligopoly to sustain ?
Show answer Hide answer
Answer: A. all of these answers
Oligopolistic firms face strong individual incentives to undercut agreed prices and capture larger market shares. Antitrust regulations prohibit formal cartel agreements, forcing firms to rely on unstable tacit coordinat...
Q6. What are conflicts between different levels of the same distribution channel called ?
Show answer Hide answer
Answer: B. vertical conflicts
Vertical conflicts occur between different levels within the same distribution channel, such as manufacturers and wholesalers. Disagreements over pricing, profit margins, or promotional responsibilities between channel p...