what is meant by biased growth? what implication does biased growth have for a country's terms...

what is meant by biased growth? what implication does biased growth have for a country's terms of trade and economic and economic welfare? discuss

Expert Solution

ANSWER: In Economics, the growth that aids production of one good over another is termed to be "biased" towards that good. Thus import-biased growth is growth which assists the production of imported goods, and export-biased growth assists in the production of exported goods. When growth is biased towards the export good, it is likely that the terms of trade effects are reinforced. On contrary when growth is biased towards the import good, then it is likely that bias of growth works against the terms of trade effect. Thus it can produce two effects: Positive direct impact on growth (shift out of PPF); and secondary effect through changes in terms of trade (when nation is large). When growth induces large decline in terms of trade, it there is a possibility (but not likely) that the negative welfare effect from the terms of trade reduces the dominating power of the positive direct effect from growth.

Rahul Sunny answered 2 years ago

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