Question

According to the Prebisch-Singer hypothesis, this fate has befallen many developing countries given the general decline in commodity prices in relation to the price of manufactured goods.A) TrueB) False

Answer 1

Answer: True

Explanation;

Generally, manufactured goods cost more than the commodity goods that they were manufactured from due to the value that has been added to them. This is what the Prebisch-Singer hypothesis argues, that commodity prices decline overtime in relation to manufacturing good prices.

This is a fate that has befallen many developing countries as many of them export commodity goods to developed countries who then add value to them, turning them into manufactured goods and then selling them back to developing countries at a higher price thereby negatively affecting their balance of trade.