Question

Explain in your own words the relationship between trade, aid, and Dutch disease.

Answer 1

DUTCH disease consist that when foreign aid is spent, even half , on non- traded goods, the aid recipient's  country currency gets in real terms. This then makes its exports less competitive on world markets. As a result, exports fall and imports increase, thus worsening the trade balance.

This can be understood as relationship between trade, aid and dutch diseases all the factors are interrelated if something goes wrong whole process gets dusty. Dutch disease can be said to have direct impact on trade.