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Chap011 - Chapter 11 Economic Growth and International...

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Chapter 11 – Economic Growth and International Trade CHAPTER 11 ECONOMIC GROWTH AND INTERNATIONAL TRADE Learning Objectives: To understand the different ways growth can affect trade. To grasp how the source of growth affects the nature of production and trade. To see how growth and trade affect welfare in the small country. To understand how growth in a large country can have different welfare effects than growth in a small country. I. Outline Introduction - China – A Regional Growth Pole Classifying the Trade Effects of Economic Growth - Trade Effects of Production Growth - Trade Effects of Consumption Growth Sources of Growth and the Production-Possibilities Frontier - The Effects of Technological Change - The Effects of Factor Growth Factor Growth, Trade, and Welfare in the Small-Country Case Growth, Trade, and Welfare: The Large-Country Case Growth and the Terms of Trade: A Developing-Country Perspective Summary II. Special Chapter Features In The Real World: Labor and Capital Requirements per Unit of Output Concept Box 1: Labor Force Growth and Per Capita Income Concept Box 2: Economic Growth and the Offer Curve In The Real World: Terms of Trade of Brazil, Jordan, Kenya, and Thailand, 1980-2005 III. Purpose of Chapter The purpose of this chapter is to demonstrate how economic growth affects international trade and the possible welfare effects that accompany growth in the open economy. 11-1
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Chapter 11 – Economic Growth and International Trade IV. Teaching Tips A. The chapter begins with an examination of the huge increase in China’s international trade and its impact on economic growth. The interesting aspect is that the growth of Chinese trade is also having an impact on South Korea, Taiwan, and even Japan. This is an example of trade serving as a source of growth for an entire region. B. In discussing the production and consumption effects of growth on international trade, we distinguish between the normal protrade and antitrade effects and the more extreme ultra- protrade and ultra-antitrade effects. However, one can focus on just the pro and anti effects generally and ignore the further breakdown. What is important for the student to realize is that growth influences trade both from the supply side and from the demand side. C. We chose to analyze the influence of technological change on growth only from the standpoint of factor-neutral, commodity-specific change. If you have a special interest in growth and trade, you might find it useful to note that economywide technological change can be factor-specific as well. In this instance, the impact on the economy conceptually is analogous to that of a factor-neutral change plus growth in availability of the affected factor, and can be analyzed as such.
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