Question

The developing countries, it is argued, usually
(a) enjoy favourable terms of trade
b) suffer from adverse terms of trade
(c) have better income terms of trade​

Answer 1

Answer:

B

Explanation:

Developing Countries face a lot of problems and also are dumped by the Developed countries for their own profits.

Answer 2

Option b is the correct answer.

The developing countries, it is argued, usually suffer from adverse terms of trade.

1. Developing countries suffer from adverse terms of trade because they primarily deal in primary exports. The demand for primary exports is income inelastic and imports of these countries is income elastic.
2. So even when the world income rises the quantity demanded of primary exports will change only slightly and thus the income from exports of developing countries will remain almost the same.
3. Whereas the imports being income elastic when the world income rises the quantity demanded of these goods will change significantly and thus expenditure will be more.