INTLCLASS - International Economics & Macro Key Questions...

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1 International Economics & Macro ± Key Questions ² Why do economists generally favor free trade? Why restrict trade? How? ² How are exchange rates determined in the short-run? The long-run? How do exchange rates matter? ² What’s bad about a current account deficit? A Financial 1 account surplus? ² What’s wrong with globalization? Globalization is good / antiwto In the News? 2 3
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2 Course Issues ± Final Exam Conflicts – see me with documentation ± Q&A ² a. Weds 12/21 10:30am Weds 12/21 1pm ² C. Tues 12/20 10:30am d. Tues 12/20 1pm A 850 4 ± Review Guide & Essential Questions & chat room ± Grade book problems-check ± Grading ± Impt Dates 12/20 last class-ec, inv game ² 12/22 8am FINAL EXAM B+ 800 B 780 C+ 740 C 670 D 600 F< Investment Game ² ² MUTUAL FUNDS, ETFs, Hedge Funds, Bonds ² Next/Last - derivatives 5 Trade Facts ² Net Exports X-M ± <0 – trade deficit >0 trade surplus ² Current Account Deficit ± X-M $250 bil in 2009 ± Exports $2.16 trillion ± Imports $2.41 tril1ion 6 ± Trade Deficits since 1976 ² Deficit on Goods, surplus on services ± Harm? D=C+I+G+X-M ² Largest Trading Partners ± Canada: China: Mexico: Japan: Germany:United Kingdom: South Korea:France:Taiwan:Singapore:
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3 Why do Economists Generally Favor Free Trade? ± Comparative Advantage ² Specialization in lowest opportunity cost ± Versus absolute advantage ± From different endowments of resources, abilities ± diversity of tastes; 7 ± economies of scale ² More output/production possible for all ² transmission of ideas ² international competition ² Trends: GATT, EU, NAFTA, CAFTA, WTO How to Restrict Trade? ± How ² Tariffs ² Quotas ± Japanese cars 1981 ² Dumping Mechanisms 8 ± Steel ² Subsidies ± Agriculture ± Airbus/ Boeing Why Restrict Trade? ± Arguments used ² Save Jobs ² Unfair Competition due to: ± weaker environmental/ safety standards ± exploitation Hi h l ± Answers ² Job cost too high to consumers ± -subsidize displaced workers ± Helps environmental/ safety standards improve abroad ± Exploitation is really benefi 9 ± How to compete with low wages ² Dumping / Predatory Competition ² Protect Infant Industries ² Defense/ Strategic interests ² Retaliation Exploitation is really benefit ± Compete with low wages with high productivity
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This note was uploaded on 02/08/2011 for the course ECONOMICS 220:103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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INTLCLASS - International Economics & Macro Key Questions...

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