Exam 7: Growth and Trade Part II: Trade Policy

When economic growth in a large country lowers its willingness to trade, it can result in:

For a country already engaged in trade, biased growth will essentially lead to an increased willingness to trade.

Assume that corn and cloth are each produced using both land and labor in a country. Corn is relatively land-intensive. If the country experiences an increase in its endowment of labor, product prices remaining unchanged, the Rybczynski theorem will predict that the production of corn will decline.

Which of the following refers to individual efforts by businesses that focus on improvements in production technologies for existing products and on new production technologies for new or improved products?

Suppose a large country experiences economic growth which results in a reduced willingness to trade. The country's terms of trade will _____ because the fall in demand for imports will cause the price of its exports to _____ relative to the price that it has to pay for its imports.

Countries that export a diversified selection of export products do not seem to be at much risk of experiencing immiserizing growth.

In the presence of free trade, how are the effects of economic growth different for a large country than for a small country?

Any change in the volume of export or import by a small country will have no effect on its terms of trade.

The Rybczynski theorem asserts that in a two-good model, and assuming that product prices stay constant, growth in the endowment of one factor of production with the other factor remaining unchanged, will result in:

Suppose that country A, a relatively capital-abundant country, experiences further expansion in its endowment of capital. Explain how this might affect its volume (amount) of trade and its terms of trade with the rest of the world. Under what conditions (if any) would the economic well-being of country A decline after the increase in its capital endowment?

Suppose country X is one of the largest exporter of coffee in the world. A recent massive cyclone has destroyed much of the coffee crop in country X and has considerably lowered its exports. Which of the following is a likely consequence of this disaster?

The figure given below shows a shift in the production-possibility curve of a country from AB to AC. Here, S₁ and C₁ are the initial production and consumption points respectively. S₂ and C₂, on the other hand, are the final production and consumption points respectively. The shifts shown in the given figure indicate that:

Large countries are _____ susceptible to immiserizing growth than small countries because when large countries expand their exports, their terms of trade _____.

In the figure given below, we see an expansion of the production-possibility curve (from PPC₁ to PPC₂). The two goods produced are wheat and cloth, which are land-intensive and labor-intensive respectively. The outward shift of the production-possibility curve is likely the result of: $\text { Wheat }$

Which of the following is one of the fundamental sources of long-run economic growth?

If trade is consistent with the H-O theory, then growth in a country's scarce factor of production will lead to:

Which of the following statements is true?

The figure given below shows a shift in the production-possibility curve of a country from AB to AC. Here, S₁ and C₁ are the initial production and consumption points respectively. S₂ and C₂, on the other hand, are the final production and consumption points respectively. Which of the following is illustrated by this figure?

In a two-commodity world, balanced growth in a country always decreases its willingness to trade because the country becomes self-sufficient in the production of both the goods.

It is usually safer for a large country to subsidize its export-oriented industries rather than the import-replacing industries.