Question

If a country’s growth is biased in favor of its import, this should unequivocally improve its terms of trade and its economic welfare

Answer 1

It is true that if an economy’s growth is biased in favor of its import then its terms of trade will improve. The reason is that if the economy is more biased for a product then it will tend to manufacture more of that good. The production of such goods will result in the shift of supply curve due to more production. This shift can reduce the terms of trade and turn the country into an exporter. Thus import biased terms of trade are better for country’s growth. This bias will however not be good for economic welfare due to change in terms of trade. Thus import biased growth is good for improving terms of trade and economic growth.