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Chapter 1 Introduction

Chapter 1 Introduction. Kernel of the Chapter. What is International Economics About? International Economics: Trade and Money. Introduction. The study of international economics has never been as important as it is now.

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Chapter 1 Introduction

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  1. Chapter 1 Introduction

  2. Kernel of the Chapter • What is International Economics About? • International Economics: Trade and Money

  3. Introduction • The study of international economics has never been as important as it is now. • Nations are more closely linked through trade in goods and services, through flows of money, and through investment than ever before.

  4. Introduction Figure 1-1 Exports and Imports as a Percentage of U.S. National Income

  5. Introduction Figure 1-2 Exports and Imports as Percentages of National Income in 1994

  6. What is International Economics About? • International economics deals with economic interactions that occur between independent nations. • Several issues throughout the study of international economics.

  7. What is International Economics About? • The Gains from Trade • When countries sell goods to one another, all countries benefit. • Trade and income distribution • The Pattern of Trade (who sells what to whom?) • Interindustry trade • Intraindustry trade

  8. What is International Economics About? • How Much Trade? • Many governments are trying to shield certain industries from international competition. • Debate on the costs and benefits of protection relative to free trade. • Advanced countries’ policies pursue industrial targeting. • Developing countries’ policies promote industrialization:

  9. What is International Economics About? • The Balance of Payments • Is it good to run a trade surplus and bad to run a trade deficit? • Exchange Rate Determination • The role of changing exchange rates is at the center of international economics.

  10. What is International Economics About? • International Policy Coordination • How to produce an acceptable degree of harmony among the international trade and monetary policies of different countries without a world government that tells countries what to do. • The International Capital Market • Risks associated with international capital markets: • Currency depreciation AND National default

  11. International Economics: Trade and Money • International trade analysis focuses primarily on the real transactions in the international economy. • International monetary analysis focuses on the monetary side of the international economy.

  12. Structure of the Book • International trade issues • Part I: International Trade Theory • Part II: International Trade Policy • International monetary issues • Part III: Exchange Rates and Open-Economy Macroeconomics • Part IV: International Macroeconomic Policy

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