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Session 7

Session 7. Growth and Trade. Balanced Versus Biased Growth. Single Factor Growth. Correct. Incorrect. Rationale behind Single Factor Growth. Effect on the Country’s Terms of Trade. 1. Small Country. The size of trade cannot influence the world price. 1. Large Country.

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Session 7

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  1. Session 7 Growth and Trade

  2. Balanced Versus Biased Growth

  3. Single Factor Growth • Correct • Incorrect

  4. Rationale behind Single Factor Growth

  5. Effect on the Country’s Terms of Trade 1. Small Country • The size of trade cannot influence the world price. 1. Large Country • The size of trade can influence the world price.

  6. Small Country International prices are not influenced by trade. Slope =1 S1 Trade Line C1 Equal

  7. S2 S1 C2 C1

  8. Large Country International prices are influenced by trade. Wheat are highly demandedin the world market.

  9. Kopi Luwak 0.5 K.G. = 10,000 Bath (approx)

  10. Wheat are not highly demandedin the world market.

  11. What is the main difference between the consumption of these products ?

  12. It is possible that expanding a country’s abilityto make the products that it exports can actuallymake the country worse off. Rate of Return

  13. Technology and Trade • New technology is difficult to keep secret, and othercountries have an incentive to obtain the technologyimprovement. German The U.S. Japan

  14. The innovating country is initially the exporter ofnew product, but it eventually becomes an importer. The U.S. Importer (Present) Exporter (Pass)

  15. First Color Television

  16. With Technology diffusion, openness to trade affects growth • If a country closes itself to international trade,it probably also cut itself from new technology.This then make the country grow more slowly.

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