Suppose, as a result of various dynamic factors associated with exposure to international competition, Albania's economy grew, and is now represented by the rightmost production possibility frontier in the figure above
If its point of production with trade was point c, would you consider this growth to be export-biased or import biased? If Albania were a large country with respect to the world trade of A and B, how would this growth affect Albania's terms of trade? Its real income?
If point c is the production point with trade, then Albania has a comparative advantage in good B. Therefore, from the shape of the new production possibility frontier (as compared to the original one), this is clearly an export-biased growth. This ceteris paribus would tend to worsen Albania's terms of trade. The terms of trade effect would, again ceteris paribus, worsen its real income. However, the growth itself acts in the opposite direction.
You might also like to view...
When a budget is not approved in time, _____
a. agencies operate on the basis of continuing resolutions b. agencies operate on the basis of a budget resolution developed by budget committees c. agencies tend to shuts down d. the President can force Congress to act e. agencies borrow from the Federal Reserve
Discuss the factors behind the recent decline in labor union membership
A firm will go out of business if price is below
A. marginal cost. B. marginal revenue. C. average total cost. D. average fixed cost.
Without calculating the price elasticity of demand, indicate whether demand for each movie is elastic, inelastic or unit-elastic. For which movie would a reduction in price produce the greatest increase in revenue?
