Economic growth gives rise to many problems of international economic adjustment. This lecture is concerned with the formal analysis of one group of such problems, the effects of economic growth of various kinds on the growing country's demand for im-
y I1 IZ
ports and dependence on international trade. The analysis may be treated in either of two ways: as an analysis of the nature of the eqUilibrium adjustment which growth requires of the international economy; and as a preliminary to analysis of the monetary problems which arise if the mechanism of international adjustment prevents or inhibits the attainment of the required new international equilibrium. The argument employs the standard two-country two-factor model, assuming constant returns to scale in production and perfectly com-
petitive conditions. When we come to analyse the effects of specific types of economic growth, the model will be 'concretized' by making assumptions about the nature of the countries and the demand and supply conditions of the goods they produce.