Int Econ Notes - Lecture1 15:59:00 ? living o(x m/GDP o

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Lecture 1 02/09/2010 15:59:00 Once an economy engages in trade they are connected to others. Why do they engage in trade? So they can achieve a higher standard of  living. A rough measure between two countries economic relationship: o (x + m) / GDP o This ratio is generally larger for developing countries than developed. o Within developed countries we find the larger the country the smaller  the ratio, the smaller the developed country the larger the ratio. We have experienced a more rapid growth in trade than production world  wide, this means that economic interdependence is growing. o 2004 GDP grew 2% whereas trade grew 6%. Countries tend to trade with countries that: Are close, have high GDP and  open trade policies. This is an example of the Gravity model. International Economics analyzes the flow of goods, services and payments  between a country and the rest of the world, the policies which regulate this  flow, and their impact on a nations welfare. 1) Pure Theory of Trade. Concerned with: What is the basis of trade? 2) Commercial Policy (Protectionism) Restrictions and their effects. ^ These two are pure micro theory. 3) Foreign Exchange Markets 4) Balance of Payments 5) Adjustments in Balance of Payments methods of correcting disequilibrium in different types of monetary systems
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Lecture 2 02/09/2010 15:59:00 January 22, 2009 732 928 2000 2619
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What is the basis for and gains that can be derived from trade? Assumption is  nation is going to engage in trade if they’re going to benefit from it. How are these benefits generated and how are they divided among countries? What is the pattern of trade? What are the commodities the nation tends to  export and import? Approaches: PRE 1776      Mercantilistic approach: mercantilist generally had to say about trade  that they favor exports over imports. Export never import. Exception to the rule to the  notion of importing goods was to import raw material so they can produce goods for  exporting. Collection of essays written by bankers, etc expressing their views regarding  commerce. According to mercantilist there was no such thing as mutually beneficial  trade. One nation gained and other lost out. When trade occurred between two nation,  exporting nation gained because they were sending out goods/commodities but were  being paid with gold/silver. Exporting country was becoming richer and more powerful.  Importing company were receiving goods/commodities but had to pay with gold/silver  and were becoming poorer therefore weaker. Generally recommended govt to become 
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This note was uploaded on 02/08/2011 for the course ECONOMICS 101 taught by Professor June during the Spring '08 term at Rutgers.

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Int Econ Notes - Lecture1 15:59:00 ? living o(x m/GDP o

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