International Trade
Module Title
International Trade and Development Issues
Module Code
Econ 3527
Essay Title
Examine the consequences of economic growth of an economy on its international trade composition. Discuss how the conclusions may vary IF the economy is either a “small” country or a “large” country.
Student Number
P09286445
F.A.O
Parmjit Kaur
Word Count
2016
The paper will begin by describing economic growth and look into the effects of the growth. The author will then attempt to discuss how the conclusions may vary if the economy is either a “small” or a “large” country.
Economic growth is an increase in the ability of an economy to produce goods and services, compared from different periods of time, this is usually done year to year. Economies that trade on the international market will often benefit from economies of scale as they can produce their goods at a larger rate than normal. Countries favour international trade as they gain the ability to produce goods in which it has a comparative advantage (Krugman and Obstfeld, 2006).
[DIAGRAM HERE]
Fig.1 shows an economy’s PPF where they are producing two products. The diagram shows that if the small country were to produce more of commodity Y, they would have to forego some production of commodity X; this is opportunity cost. To create a solution to this opportunity cost, the country can choose to forego production of X, focus on producing Y, and sell it on the international market while buying X on the international market also. The shift of the curve towards the right indicates economic growth (G1 to G2).
Growth is achieved via an increase in the factors of production, which are usually capital, labour, and technology improvements. Most countries do not achieve balanced growth, as there would usually be a bias within growth that will favour one of the countries endowments over the other. Biased growth is illustrated when implementing the Rybczynski Theorem. The Rybczynski Theorem
International Trade and Development Issues
Module Code
Econ 3527
Essay Title
Examine the consequences of economic growth of an economy on its international trade composition. Discuss how the conclusions may vary IF the economy is either a “small” country or a “large” country.
Student Number
P09286445
F.A.O
Parmjit Kaur
Word Count
2016
The paper will begin by describing economic growth and look into the effects of the growth. The author will then attempt to discuss how the conclusions may vary if the economy is either a “small” or a “large” country.
Economic growth is an increase in the ability of an economy to produce goods and services, compared from different periods of time, this is usually done year to year. Economies that trade on the international market will often benefit from economies of scale as they can produce their goods at a larger rate than normal. Countries favour international trade as they gain the ability to produce goods in which it has a comparative advantage (Krugman and Obstfeld, 2006).
[DIAGRAM HERE]
Fig.1 shows an economy’s PPF where they are producing two products. The diagram shows that if the small country were to produce more of commodity Y, they would have to forego some production of commodity X; this is opportunity cost. To create a solution to this opportunity cost, the country can choose to forego production of X, focus on producing Y, and sell it on the international market while buying X on the international market also. The shift of the curve towards the right indicates economic growth (G1 to G2).
Growth is achieved via an increase in the factors of production, which are usually capital, labour, and technology improvements. Most countries do not achieve balanced growth, as there would usually be a bias within growth that will favour one of the countries endowments over the other. Biased growth is illustrated when implementing the Rybczynski Theorem. The Rybczynski Theorem
References: Berg, V. and Lewer, J (2007). International Trade and Economic Growth. USA: M.E. Sharpe, Inc. p103. Bhagwati, Jagdish, (1958), “Immiserizing Growth: A Geometrical Note”, Review of Economic Studies, 25 (3), June, p.201-205. Grossman, G. M., & Helpman, E. (1991). Trade, knowledge spillovers, and growth. European Economic Review, 35(2), p517-526 Kaur P Korres, G (2012). Technical Change and Economic Growth: Inside the Knowledge Based Economy. 2nd ed. Cornwall, Great Britain: Ashgate Publishing, Ltd. p88-89. Krugman, P & Obstfeld, M (2006). International Economics. 7th ed. USA: Pearson. p85-93. Kuznets, S. (1955). Economic Growth and Income Inequality. The American Economic Review. 45 (1), p1-28. Moran T, & Graham, E & Blomström, M (2005). Does Foreign Direct Investment Promote Development?. USA: Institute for International Economics. p195-200. Pugel, T (2009). International Economics. 14th ed. New York: McGraw-Hill. p121-131. Solow, R. (1956). A Contribution to the Theory of Economic Growth.Quarterly Journal of Economics . p65-94. Quah, D. (2001). National Income. Economic Growth: Measurement . p4093-4094. Winters, L (1991). International Economics. 4th ed. USA & Canada: Routeledge. p201-215.