368 
Te i rive 
INTERNATIONAL TRADE 
non-merchandise items cause the foreign exchanges to shift, and 
thereafter lead to larger or smaller movements of physical goods. 
Next, these very fluctuations in exchange, while caused by mer- 
chandise movements, become in their turn causes of other mer- 
chandise movements. The new rates of exchange which are 
brought about by heavy crop exports operate as a damper on other 
exports. While they serve to stimulate all imports, they serve 
also to check some exports, the exports, namely, of those 
commodities whose conditions of supply and demand are not 
affected by the crop changes. This again is a consequence more 
readily observable than is the analogous phenomenon in the case 
of change of demand. The same general reasoning is applicable 
to both cases. An altered demand, like an altered supply, modi- 
fies the movement of certain items of merchandise ; this affects the 
rates of exchange ; this again affects other merchandise movements. 
The characteristic phenomena — first, the direct impact on rates 
of foreign exchange, and next the rebound on the movements of 
other merchandise — simply come more frequently and more 
unmistakably under our eyes in cases of change in supply. 
The eventual effects of course are not the same as the immediate. 
As in the case of increased demand, so in that of increased supply, 
there is prolonged readjustment. The rates of exchange, the 
course of prices in the trading countries, the barter terms of trade, 
are gradually modified. The nature of the ultimate outcome is 
different according as there is an increase of supply or an in- 
crease of demand. An increase of supply from a country — an 
increased offering of exports from it — tends in the end to make 
its barter terms of trade less favorable, whereas an increase of 
demand for its products tends to make them more favorable. 
As regards ultimate consequences, the difficulties in the way of 
observation and verification are equally great in the two cases. 
It is only the first stages in the series of effects which are readily 
discerned even in the case of increased supply. Crop changes, 
while they are conspicuous and their immediate effects also are 
conspicuous, show no regularity. Even tho the output of agricul 
tural produce may tend on the whole to enlarge, it enlarges at no