chapter  3
26 Pages

Comparative advantage and the production possibilities frontier

This chapter covers the concept of economic development and examine aspects of the universe of countries known as the developing economies. The critical factor for these countries is their rate of economic growth. The chapter discusses the theory of economic growth, that defines the factors of production that contribute to economic growth, and shows how these determinants interact to produce both Gross Domestic Product (GDP) growth and growth in GDP per capita. It shows how international trade can be used to enhance economic growth, that explores the potential connections between international trade and factor movements and economic growth. The chapter describes the issue of openness to trade and growth, the movements of capital and the transfer of technology between countries and their effect on economic growth, and the role of multinational corporations (MNCs) in the process of economic development. It deals with the role of developed-country governments and international organizations in their efforts to increase economic growth in developing countries.