Deck 11: Economic Growth and International Trade

Question 1

If, when a country grows, its home production of its export good increases by 10 percent and its home consumption of its export good also increases by 10 percent, then, with the economic growth and with other things equal, the country's absolute quantity of exports will __________.

A) increase
B) decrease
C) remain constant
D) increase, decrease, or remain constant - cannot be determined without more
Information.

Answer 1

increase

Question 2

In a Heckscher-Ohlin context, other things equal, growth of the relatively-abundant factor Of production in a country that is a "large" country will lead to __________ willingness to trade and to __________ in the country's terms of trade.

A) an increased willingness; a deterioration
B) an increased willingness; an improvement
C) a decreased willingness; a deterioration
D) a decreased willingness; an improvement

Answer 2

an increased willingness; a deterioration

Question 3

It is likely that a protrade production growth effect will lead to an expansion of trade since the presence of inferior goods is relatively rare. Explain.

Answer 3

not answered

Question 4

If population growth is taking place,

A) one can no longer meaningfully compare community indifference curves to evaluate The impact of growth and trade.
B) the growth in population must be accompanied by increased capital stock or changes In technology if social welfare is to increase (if increasing returns to scale are not Present).
C) the production-possibilities frontier will shift out relatively more for the labor-Intensive good than for the capital-intensive good.
D) all of the above.

Question 5

Other things equal, which one of the following factors would likely NOT contribute to a worsening of the terms of trade of developing countries?

A) heavy reliance on primary product exports
B) the differing price effects of technological change compared to developed countries
C) developing countries' attempts to diversify their exports and to include more Manufactured goods in their export bundle
D) differences in the demand characteristics of the developing countries' exports and Imports

Question 6

In the two-commodity context, you are given the following information pertaining to country I in the year 2009 and the year 2014:
Production of good X in 2009 = 200 units
Production of good X in 2014 = 198 units
Consumption of good X in 2009 = 160 units
Consumption of good X in 2014 = 176 units
Production of good Y in 2009 = 100 units
Production of good Y in 2014 = 120 units
Consumption of good Y in 2009 = 120 units
Consumption of good Y in 2014 = 131 units
Given this information, this country, in 2009, is __________ and, in 2009, the country is __________.

A) exporting good Y and importing good X; exporting 20 units of good Y and
Importing 40 units of good X
B) exporting good Y and importing good X; exporting 11 units of good Y and
Importing 16 units of good X
C) exporting good X and importing good Y; exporting 40 units of good X and
Importing 20 units of good Y
D) exporting good X and importing good Y; exporting 16 units of good X and
Importing 11 units of good Y

Question 7

(a) Define the five types of "production effects" of economic growth in a country and the five types of "consumption effects" of the economic growth. Then define the types of possible "overall" or "net" effects of the country's growth on the relative importance of the trade sector.
(b) Developing countries are often concerned that their terms of trade might deteriorate as economic growth occurs. In terms of the analysis of part (a) of this question, other things equal, what type(s) of growth must occur and what type of country ("large" or "small") must a developing country be in order for the country's terms of trade to deteriorate as the country grows? Explain.

Question 8

(a) State the Rybczynski theorem. Then, in a two-factor, two-good Heckscher-Ohlin context, illustrate and explain the "production effect" of growth in the labor force in a relatively capital-abundant country, other things equal.
(b) In the situation of the labor force growth in part (a) above, suppose that the country is a "large" country. Define the meaning of a "large" country in international trade. Then, and assuming that the "net" or "overall" effect of the labor force growth in part (a) is of the same type as the "production effect," illustrate and explain, other things equal, the impact of that labor force growth on the country's willingness to trade and the country's terms of trade.
(c) Finally, define "immiserizing growth." Then very briefly explain how "immiserizing growth" could or could not happen in the situation of part (b) above.

Question 9

Given the information in Question #14 above, it can be validly concluded that the type of "consumption effect" that takes place between 2009 and 2014 in country I is __________ Consumption effect.

A) an ultra-antitrade (UA)
B) an antitrade (A)
C) a protrade (P)
D) an ultra-protrade (UP)

Question 10

Why is it difficult to analyze the welfare implications of growth in the neoclassical model? What proxy is often used to reach a conclusion about the effects of growth? What leads to the conclusion that, if welfare is to improve with growth in the labor force, there must be accompanying growth in the capital stock and/or improvements in labor productivity?

Question 11

(a) Define the five types of "production effects" of economic growth in a country. Other things equal, if one factor of production in a country (either labor or capital) grows, what are the only two types of production effects that are possible because of the growth in this factor? Briefly explain.
(b) Define the five types of "consumption effects" of economic growth in a country? Why can economists usually rule out two of these types when discussing likely possibilities in the "real-world" growth of countries?
(c) Define the five types of possible "net" or "overall" effects of the country's growth on the importance of the trade sector and indicate which types would, other things equal, lead to a deterioration of the growing country's terms of trade (assuming that the country is a "large" country).

Question 12

In recent years, trade has been growing faster than income for many countries. What combination of trade effects is sufficient for this to come about? Is this behavior consistent with the Rybczynski theorem? Under what circumstances?

Question 13

With economic growth (where the growth reflects the "net" or "overall" effect of the Production and consumption effects), a country's offer curve (with the export good on the Horizontal axis)

A) will always shift or pivot outward.
B) will shift or pivot outward in the cases where the growth is "protrade" or "ultra-Protrade" in nature and will shift or pivot inward in the cases where the growth is "antitrade" or "ultra-antitrade" in nature.
C) will shift or pivot inward in the case where the growth is "ultra-antitrade" in nature.
D) will not shift or pivot in the case where the growth is "neutral" in nature.

Question 14

In the analysis of growth and trade, if a country's national income growth leads to an absolute increase in imports but to a slower relative growth in imports than in national income, this growth pattern is called __________ growth.

A) antitrade biased
B) protrade biased
C) ultra-antitrade biased
D) neutral

Question 15

Assuming a two-country world, suppose that country I's income elasticity of demand for Imports is 1.2 and that country II's income elasticity of demand for imports is 0.9.Suppose also that, during 2010, country I's GDP grows by 5 percent and country II's GDP grows by 6 percent. Given these income elasticities of demand for imports and These growth rates and with other things equal, the terms of trade of country I with Country II during 2010 would __________.

A) improve
B) remain the same as before the growth in the two countries took place
C) deteriorate
D) improve, remain the same as before the growth in the two countries took place, orDeteriorate - cannot be determined without more information

Question 16

Developing countries often claim that growth and trade have left them no better off or perhaps worse off. How might you explain this result theoretically? Could this result obtain if the countries tended to be relatively small? Why or why not?

Question 17

Given the information in Question #14 above, it can be validly concluded that the type of "production effect" that takes place between 2009 and 2014 in country I is __________ production effect.

A) an ultra-antitrade (UA)
B) an antitrade (A)
C) a protrade (P)
D) an ultra-protrade (UP)

Question 18

If the "net" or "overall" effect (which is the net result of the production and consumption effects) of a country's growth is "protrade" in nature, then the country's offer curve (with the export good on the horizontal axis) will shift or pivot __________; if the "net" or "overall" effect is "antitrade" in nature, then the country's offer curve (with the export good on the horizontal axis) __________.

A) outward (or to the right); will shift or pivot inward (or to the left)
B) outward (or to the right); also will shift or pivot outward (or to the right)
C) inward (or to the left); also will pivot inward (or to the left)
D) inward (or to the left); will shift or pivot outward (or to the right)

Question 19

Growth of the scarce factor in the large-country case will, other things equal,

A) always expand trade and improve the terms of trade.
B) expand both exports and imports and lead to an improvement in the terms of trade.
C) result in a protrade production effect and a deterioration in the terms of trade.
D) result in an ultra-antitrade production effect and an improvement in the terms of trade.

Question 20

Is it possible that growth in the scarce factor can actually lead to expanded trade in the small-country case? Under what circumstances?

Question 21

If a country's total output grows by 10 percent and its imports fall by 6 percent because ofThe growth, this growth pattern would be classified as __________ growth.

A) ultra-antitrade
B) antitrade
C) protrade
D) ultra-protrade

Question 22

Suppose that country I's income elasticity of demand for imports is 0.8 and that country II's income elasticity of demand for imports is 1.5. These income elasticities indicate that growth in country I would be classified as __________ and that growth in country II Would __________.

A) "antitrade" growth; also be classified as "antitrade" growth
B) "antitrade" growth; be classified as either "protrade" growth or "ultra-protrade"Growth
C) either "protrade" growth or "ultra-protrade" growth; be classified as "antitrade"Growth
D) either "protrade" growth or "ultra-protrade" growth; also be classified as either"protrade" or "ultra-protrade" growth

Question 23

Other things equal, which one of the following types of growth in a large country will have the most adverse impact upon that country's terms of trade?

A) ultra-antitrade growth
B) antitrade growth
C) protrade growth
D) ultra-protrade growth

Question 24

If growth in national income is due entirely to growth in the labor force, under the Heckscher-Ohlin assumptions,

A) there will be a decline in per capita income.
B) there will be an increase in per capita income.
C) it is impossible to determine the direction of impact on per capita income without More information.
D) there will be an increase in trade and welfare.

Question 25

If technological change in an industry results, at given relative factor prices, in a reduction in the amount of both capital and labor used to produce a given amount of output, but the reduction in labor requirements is greater than the reduction in capital requirements, this technological change would be called __________ in nature.

A) neutral
B) labor-saving
C) capital-saving
D) both labor-saving and capital-saving

Question 26

If a country grows such that, at constant relative prices, the production of its export good Rises by 5 percent and the production of its import-competing good rises by 15 percent (and these are the only two goods produced in the economy), this production pattern Would be called __________ production effect.

A) a "neutral"
B) a "protrade"
C) an "antitrade"
D) an "ultra-antitrade"

Question 27

In the analysis of growth and trade, growth in the labor force (coupled with no growth in the capital stock) in a relatively capital-abundant country would lead to what type of
"production effect" in the country?

A) ultra-antitrade production effect
B) antitrade production effect
C) protrade production effect
D) ultra-protrade production effect

Question 28

If, at constant relative prices in a two-commodity and two-factor world, growth in a country's labor force causes an expansion in output of the labor-intensive good and a contraction in output of the capital-intensive good, this situation is an example of the

A) Stolper-Samuelson theorem.
B) Rybczynski theorem.
C) Heckscher-Ohlin theorem.
D) Leontief paradox.

Question 29

With economic growth, a country's offer curve (with the export good on the horizontal Axis)

A) will always shift or pivot outward.
B) will always shift or pivot inward.
C) will shift or pivot inward in the case ultra-antitrade growth.
D) will not shift or pivot in the case of neutral growth.

Question 30

Suppose that the "net" or "total" effect of the consumption and production effects of a Country's growth is that the country's offer curve shifts or pivots outward (i.e., the Country is more willing to trade). In this situation, it can validly be concluded that this Country's growth can be characterized as __________ (where UP = ltra-protrade Growth, P = protrade growth, N = neutral growth, A = antitrade growth, and UA = ultra-Antitrade growth).

A) UP, P, N, or A but not UA
B) UP, P, or N but not A or UA
C) UP or P but not N, A, or UA
D) UP but not P, N, A, or UA

Question 31

If, when a country grows, its home production of its import good increases by 15 percent And its home consumption of the import good also increases by 15 percent, then, with the Economic growth, the country's absolute quantity of imports will __________.

A) increase
B) decrease
C) remain constant
D) increase, decrease, or remain constant - cannot be determined without more Information.

Question 32

Suppose that, prior to a technological change (innovation) in an industry, at existing Factor prices, it takes 30 units of capital and 100 units of labor to produce 500 units of Good X. (Assume that capital and labor are the only two factors of production.) After the Innovation, it takes 25 units of capital and 50 units of labor to produce 500 units of good X (at the same factor prices as before the innovation). In this situation, the technological
Change would be classified as a __________ technological change.

A) capital-saving
B) labor-saving
C) neutral
D) capital-saving and labor-saving

Question 33

Suppose that country I's income elasticity of demand for imports (YEM) is 0.8. This YEM means that, as country I's national income rises, the "overall" or "net" effect of its growth on its trade sector is an __________ overall or net effect. In the context of the offer curve diagram, if country I is a "large" country and it grows (and assuming no growth occurs in its trading partner), this type of net effect means that country I's terms of trade, other things equal, will __________.

A) ultra-antitrade; improve (rise)
B) ultra-antitrade; deteriorate (fall)
C) antitrade; improve (rise)
D) antitrade; deteriorate (fall)

Question 34

In the new endogenous growth models

A) growth can occur due to "spillover" effects of research and development.
B) investment and growth are linked to acquisition of human capital.
C) growth does not necessarily converge to that of the growth rate of population.
D) all of the above