Question

A "Transfer Problem" arises when a country makes a unilateral payment to another country. According to the Ohlin-Samuelson view, the paying country's terms of trade will necessarily worsen only if:

Q: Answer-A 'Transfer Problem' arises when a country makes a unilateral payment to another country. According...

If the paying country transferor reduces its spending on its own exportable goods by more than the receiving country transferee increases its spending on those same goods, a world excess supply of the transferors exports is created, forcing their price down and worsening the transferors terms of trade.