Chapter 7 Growth and Tradea

True/False Questions

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

42. If a country is small, then its trade will have no effect on its terms of trade.

43. Given that it is irrational for a nation to undergo an expansion that makes itself worse off, we can conclude that immiserizing growth is simply a theoretical curiosity with no possibility to occur in the real world.

44. The Rybczynski theorem states that, given a two-good world and constant prices, growth in one of a country's inputs to production will lead to an increase in production in both the good that uses that input more intensively in production and the good that uses that input less intensively in production.

45. (Assume that corn and cloth are each produced using both land and labor, that corn is relatively land-intensive, and that product prices are constant.) If the country experiences an increase in its endowment of labor, an increase in the country's output of cloth and a decrease in the country's output of corn will result.

46. Immiserizing growth is the situation in which the expansion of a country's exporting industry results in a reduction in the world price of the exported good and a reduction in economic welfare in the country.

47. Growth could lead to either an increase or a decrease in a country's willingness to trade.

48. Growth with an increased willingness to engage in international trade will always improve the economic well-being of a country.

49. New technology created through research and development activities in the United States will only be used by firms in the United States.

50. Increases in the endowments of the factors of production will increase current output, but will not contribute to long-run economic growth.

51. Small countries are not subject to the immiserizing growth effect because their economic growth does not have an impact on the relative international price ratio.

52. The product cycle hypothesis was first advanced by Heckscher and Ohlin.

53. Research and development that leads to new technologies tends to be located in developing countries, because labor there is cheap.

54. The Dutch Disease was an infectious disease that spread from the Netherlands to Britain,Norway and Australia and caused the depopulation of these countries.

55. The balanced growth of a country decreases the country’s willingness to trade because the country produces and consumes more of each product.