Economic Thought of the Day

The terms of trade is the ratio between the price index of a country’s exports and the price index of its imports. Many developing countries depend on natural resources as their main export therefore; a developing country’s terms of trade depend on the long term price trends of raw materials and manufactured goods. According to Gerber, there is no evidence that raw material prices rise or fall in the long term. (Gerber, 361) If this is true, then the terms of trade depend on the real price of manufactured goods which is largely affected by productivity. This contradicts Prebisch’s export pessimism which justified the import substitution industrialization strategy used to promote growth in Latin America since the 1950’s.

Winter Vacation

Our jazz band holiday concert featured a new lead vocalist this year. On Christmas Eve we attended midnight mass at Saints Peter and Paul Cathedral in Providence. I managed to catch the last day before the holiday season on the slopes of Wachusett with my friend, Jennifer. This was my first day on a snowboard and I quickly learned how to roll down the slopes. Luckily, there were very few skiers this early in the season so I managed to avoid being run over during my repeated encounters with the snow. For those unfamiliar with Massachusetts, the picture is IVO 42°30’08”N 71°53’12”W. We took the dogs downtown to watch the fireworks over the capitol on New Years. Now that the holiday is over I have begun work on my senior thesis by researching the current trade relationship with China.