changing incomes L.R

• How does a rise in world income affect demand for goods and services?

  It increases demand for tourism and other services
• Which country is mentioned as having a strong tourist industry?

  Spain
• What happens to prices in the tourism industry when demand rises?

  Prices in the industry may rise
• What is the effect of rising prices in the tourism industry on a country's terms of trade?

  It may increase their terms of trade
• What does the Prebisch-Singer hypothesis suggest about primary goods?

  Long run price declines in proportion to manufactured goods
• What is the implication for countries dependent on primary exports according to the Prebisch-Singer hypothesis?

  They will see a fall in their terms of trade
• How does the Prebisch-Singer hypothesis affect countries reliant on primary goods?

  It suggests they will face declining terms of trade