BAR11S.5IE - Dr. Christine M. Shaw [BAR11S.5IE]...

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Dr. Christine M. Shaw [BAR11S.5IE] International Economics Outline for Week 1 I. Subject matter of international economics A. Two main areas: international trade and international finance 1. The pure theory of international trade a. Examines the basis for trade and the gains from trade b. Consists of pure theory and commercial policy 2. International finance a. Looks at the balance of payments and balance of payments adjustment under different exchanger rate systems b. Analyzes different exchange rate systems, their merits and drawbacks B. The most fundamental “model” of an economy – the circular flow 1. For an open economy: GDP = C + I + G + (X-M) 2. Will focus on the X-M aspect of this equation a. When we look at international trade → concentrate on exports and imports in real terms b. When we look at international finance → focus on the foreign payments and receipts that are generated by trade and reported as balance of payments statistics II. Globalization A. Definition 1. Globalization is a process , not an event. It is something that is on-going in the world economy 2. Can be described as the increasing international integration of markets: goods and services markets, financial markets and labour markets B. “Waves” of globalization 1. The first “wave” of globalization occurred from roughly 1870-1914 (the start of WWI) a. It was spurred by the industrial revolution and by the development of
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BAR11S.5IE - Dr. Christine M. Shaw [BAR11S.5IE]...

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