Q. Consider, as a result of several dynamic factors associated with exposure to international competition, Albania's economy grew, and is now shown by the rightmost production possibility frontier in the Figure above. If its point of production with trade was point b, could you consider this growth to be export-biased or import biased? If Albania were a large country due respect to the world trade of A and B, how could this growth affect Albania's terms of trade? Its real income? What if Albania were a small country?

Answer: If the production along with trade point was point b after that the observed growth is a case of import-biased growth and would improve Albania's terms of trade. If Albania were a petite country the world's terms of trade wouldn't change at all. In such a situation economic growth without induced change in income distributions would always increase its real income.