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Are the terms of trade (ToT) a problem?
Problem: The terms of trade (ToT) of a country fall when its import prices rise quicker than the price of its exports. Less Developed Country face a continuous deterioration of their ToT therefore a larger volume of exports has to be sold to finance a specified amount of imports.
Implications: Less Developed Countries are along with a comparative advantage within primary product are facing long term decline into export earnings through a specified volume of exports a trend made worse by increasing capacity through growth as well as the low PED for agricultural goods.
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