Question

The 'terms of trade' between the agricultural and non-agricultural sectors of an economy, a concept used to assess the relative purchasing power of farmers, is said to move against agriculture (become unfavourable for farmers) when:

Q: Answer-The 'terms of trade' between the agricultural and non-agricultural sectors of an economy, a concept...

Terms of trade are said to move against agriculture when prices of agricultural products rise more slowly than prices of the non-agricultural goods and services such as fertilizer, machinery, and consumer goods that farmers need to purchase, effectively reducing farmers real purchasing power and relative economic well-being even if their nominal farm income appears to be rising.