ECON303 Topic 1 - Semester 1 2010 ECON3003 ECON3003...

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Semester 1 2010 ON3003 ECON3003 INTERNATIONAL ECONOMICS TOPIC 1 Introduction 1
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hat Is International Economics About? What Is International Economics About? International economics is about how nations interact through trade of goods and services, g g , through flows of money and through investment. ternational economics is an old subject, but it International economics is an old subject, but it continues to grow in importance as countries become tied to the international economy through: trade in goods and services flows of money, and investment 2
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What Is International Economics About? (cont.) International trade as a fraction of the national economy has tripled for the US in the past 40 years. ompared to the US many other countries are even Compared to the US, many other countries are even more tied to international trade. Australia has always been more open than the US. 3
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What Is International Economics About? (cont.) ustralia: from Blanchard and Australia: from Blanchard and Sheen 3e 2009 4
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Exports and Imports as Percentage of U.S. National Income in 2005 Source: Organization for Economic Cooperation and Development
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ains from Trade Gains from Trade Several ideas underlie the gains from trade 1. When a buyer and a seller engage in a voluntary transaction, both receive something that they want and both can be made better off. 2. Even the least efficient countries can gain from trade – by specializing in production of a few goods and services perhaps to obtain scale economies, while consuming many goods and rvices through trade services through trade 3. Trade benefits a country by making it more efficient when it exports goods which use abundant resources and imports goods hich use scarce resources which use scarce resources. 4. Countries may also gain by trading current resources for future resources (lending and borrowing). 6
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ains from Trade (cont ) Gains from Trade (cont.) Trade is predicted to benefit countries as a whole in several ways, but trade may harm particular groups within a country . Conflicts about trade should occur between groups within countries rather than between countries. 7
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The Effects of Government Policies on Trade l i ff t td th h Policy affects trade through tariff uotas quotas export subsidies r regulations (e g product specifications) or regulations (e.g., product specifications) What are the costs and benefits of these policies? Should trade be encouraged or restricted? If a government restricts trade, what are the costs if foreign governments respond likewise? 8
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ternational Macro & Finance Topics International Macro & Finance Topics Governments measure the value of exports and imports, s well as the value of international financial capital flows as well as the value of international financial capital flows Related to these two measures is the measure of official ttlements balance or the “balance of payments”: the settlements balance , or the balance of payments : the
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This note was uploaded on 05/26/2010 for the course ECON 1160 taught by Professor Byrke during the Spring '10 term at Macomb Community College.

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ECON303 Topic 1 - Semester 1 2010 ECON3003 ECON3003...

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