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Unformatted text preview: large fall in price country must be already heavily exporting the good so that the fall in price offsets the gains from the increase in supply Rybczynski Theorem If the terms of trade are fixed, the growth of one factor of production reduces the output of one good. The growth of one factor relative to others raises the output of the sectors using it intensively and reduces the outputs of the other sectors. The expanding sector out-competes the other sectors for factors of production. This outcome is referred to as Dutch disease where the development of the natural gas industry limited the development of the manufacturing sector....
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