The way in which a country grows affects the pattern of trade of ...

[Kthamas]

The way in which a country grows affects the pattern of trade of a country. True or false. Discuss.
 
  What will be an ideal response?

Question 2

Which of the following is a critical element of the Heckscher-Ohlin model?
 
  A) That different goods display different factor intensities in their production.
  B) That some countries have no comparative advantage in anything.
  C) That trade may not be beneficial.
  D) All of the above.

[Brenm]

Answer to Question 1

Growth causes a country's PPF to shift out. This has implications for both production and consumption. Since trade is the difference between production and consumption, it will tend to be affected as well. Growth can be neutral, in which case trade volumes increase, but proportionate to initial levels. Growth can be protrade biased, in which case the country tends to trade more relative to its GNP after growth, or trade can be antitrade biased, in which case it tends to trade less. All of these situations depend upon what happens to the country's overall capital/labor ratio as growth occurs as well as income elasticities of demand.

Answer to Question 2

A