The Terms-of-Trade Effects of Devaluation Upon Real Income and the Balance of Trade

Current Views of the Effects of Devaluation on the Terms of Trade ■ The Relevant Terms-of-Trade Concept ■ The Effects upon Income and Trade ■ Testing the “Equality Rule” ■ Income and Substitution Effects ■ Three Separate Effects on Income? ■ Illustration by Analogy ■ The Analogy Expanded ■ The Benefits from “Deteriorated Terms of Trade” ■ Real Output, Intake, and Income ■ Primary and Secondary Burden ■ Income and the Propensities to Spend ■ Appendix