4.3 Emerging and developing economies

Question 1

Prebisch Singer Hypothesis

Answer 1

Suggests LR price of primary goods fall faster than manufactured goods, so contries that specialise in commodities will see a fall in terms of trade

However, price of manufactured goods as fallen recently, due to China

Question 2

Dutch Disease

Answer 2

When a country becomes a big commodity producer in a short time, casuing increased global demand for currency, appreciating it and raising cost of exports. reducing global competitiveness, causing fall in output of other areas in the economy

Question 3

Harrod-Domar model