1、Chapter 7Growth andTraden demand curve(18)n supply curven comparative advantage(38)n production possibilities curve(51)n scale economies(8889)n imperfect competitionOutlinen 1. Whats the sources of long-run economic growth?n 2. Balanced versus biased growthn 3. Growth in only one factorn 4. Changes

2、in the countrys willingness to traden 5. Effects on the countrys term of traden 6. Technology and tradeEconomic growthn expansion over time in the capabilities of an economy to produce goods and services.Economic growthn Whats the sources of long-run economic growth?q Increase in countries endowment

3、s of production factorsq Improvements in production technologiesBalanced versus biased growthn Balanced growthq the ppc shifts out proportionally so that its relative shape is the samen Balanced growth could be the result of increase in the countrys endowment of all factors by the same proportion. O

4、r it could be the result of technology improvement of a similar magnitude in both industries.如圖13-2所示：RYy1ARy0AX0X1X圖13-2 生產(chǎn)要素按同一速率增長Balanced versus biased growthn Causes for balanced growthq Factor: Increase in the countrys endowments of all factors by the same proportionq Technology: Technology im

5、provements of a similar magnitude in both industriesBalanced versus biased growthn Biased growthq economic growth that favors producing relatively more of one of the products, so that the relative shape of the new production possibility curves skews toward the faster growing product.n Biased growth

6、arises when the countrysendowments of different factors grow at differentrates, or when improvements in production technologies are larger in one of the industries than in the other.Balanced versus biased growthn Biased growthBalanced versus biased growthn What can cause biased growth?q From factors

7、: countrys endowments of different factors grow at different ratesq From technologies: improvements in production technologies are larger in one of the industriesthan in the otherYy2y1y0X0XX2X1圖13-3 生產(chǎn)要素按不同速率增長Balanced versus biased growthGrowth in only one factorn Rybczynski theorem（定理）:n two count

8、ries, product prices are constant and one factor endowment improves with the other unchangedn (1) an increase in the output quantity of the product that uses the growing factor intensively,n (2) a decrease in the output quantity of the other product.Rybczynski theoremn Example: in both wheat and clo

9、th sectors, only labor endowment is growingq Cloth production increasesq More cloth production needs more land, tooq Wheat production decreases with land lossq More labor releasesRybczynski theoremn Figure 7.2 Single-Factor GrowthRybczynski theorem - Conclusionn The development of a new natural reso

10、urce may retard development of other lines of production.n Rapid accumulation of new capital and worker skills can cause a decline in domestic production of natural resource products and make the country more reliant on importedmaterialsChanges in the countrys willingness to tradeChanges in the coun

11、tryswillingness to traden If the relative price between two products stays constant, the country could either:n Increase its willingness to trade (it could want to export and import more);n Decrease its willingness to trade (it could want to export and import less).Effects on the countrys term oftra

12、den Small countryq A country whose trade (or realistic changes in its trade) does not affect international product pricen large countryq a country whose trade (or realistic changes in its trade) affects international product pricen E.g. Ghana cocoaEffects on the countrys term oftraden Small country:

13、n Is it a small country or big country in Figure 7.1?Effects on the countrys term oftraden Large countryn Case 1: the reduction in the countrys demand for imports. See figure 7.3n How about term of trade in case 1? Improve or deteriorate?q Term of trade improvesEffects on the countrys term oftradeEf

14、fects on the countrys term oftraden Large countryn Case 1 benefits:q PPC shifts outq Terms of trade increasesEffects on the countrys term oftraden Large countryn Case 2: the increase in the countrys demand for imports.q Terms of trade decreasesq PPC shifts outn Growth in the countrys ability to prod

15、uce its export goodsq Immiserizing growth (figure 7.4)Immiserizing growthn Definition: national economic growth that, by expanding the countrys willingness to trade, causes such large decline in the countrys terms of trade that the country is worse for growing.n /ptv/vplay/22320961

16、.htmln Figure 7.4Immiserizing growthn /v?word=%E5%A4%A7%E 8%91%B1%E6%BB%9E%E9%94%80+%E5%85%8D%E8%B4%B9%E6%8B%BF&ct=301989888&rn=20&pn=0&db=0&s=0&fbl=800&i e=utf-8#pn=0n /20150413/n411175254.sht mlImmiserizing growth - conditions1. The countrys growth must be strongl

17、y biased toward expanding the countrys supply of exports and the increase in export supply must be large enough to have a noticeable impact on world prices2. The foreign demand for the countrys exports must be price inelastic so that an expansion in the countrys export supply leads to a large drop i

18、n the international price of the export product3. Before the growth, the country must be heavily engaged in trade so that the welfare loss from the decline the terms of trade is great enough to offset the gains from being able to produce moreExercisen According to the Ryb theorem, an increase in the

19、 countrys labor force will result in an increase in the quantity produced of the labor-intensive good, with no change in the quantity produced of the other good.” do you agree or disagree?Exercisen A country whose trade has almost no impact on world prices is at great risk of immiserizing growth.” d

20、o you agree or disagree?Exercisen If a country exhibits balanced growth, the production possibilities curve will:q A. shift out on the x axis.q B. shift out on the y axisq C. shift out on both axes equallyq D. not shift.Exercisen If a countrys endowment of labor increases and cloth production is relatively more labor- intensive than corn production, then according to the Rybczynski theorem, the production possibilities curve will shift outward along:q A. the cl