Internation Econ Notes - ECON 420 International Economics...

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ECON 420 – International Economics 1/17/07 Degree of involvement of US economy in international economy Look at: 1. Export/GDP Ratio of US Went from about 3% to about 10% from 1950 to 2005 for goods Went from about 1.9% to 2.9% for services 2. Import/GDP Ratio of US 3. Export/GDP Ratios of other countries – in mid 20%’s International link of US economy is much greater than its trade ratios suggests a) individual sectors more dependent on exports – e.g. aircraft manufacturing, agriculture b) large US corporation take care of overseas markets through subsidiaries – and often earning of these are higher than domestic operations c) US banks involvement abroad d) Problem of defining exports and imports: for example, many of our exports have a large import content – like a GM motor car won’t necessarily be fully American, since many components imported from overseas – same with computers – components imported from abroad - US share of world trade Was over 20% of world exports in early 50’s. declined to about 12% in later 90’s, and in 2004 for first time was second after germany - US share of world imports in 2004 was 16.1%, followed by Germany 6.7%, China 5.9% Nature of subject a) relations among sovereign units b) different currencies make a difference c) different internal economic policies d) product vs. factor mobility - Today’s challenges to traditional view of international economics 1. fixed vs. flexible exchange rates a. 2. more factor mobility than before 3. multinationals rise 4. globalization 5. vertical world division of labor 6. successes and failures of world commodity cartels – most cartels have been demolished
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7. common markets, economic unification and regional blocs a. implication of European union 8. trade of less developed countries 9. increased trade in services a. US relies on exportation of services heavily, growth of services becoming as important as growth of goods 10. is devaluation or appreciation of dollar to be desired? a. Things becoming more expensive for dollar – devaluating 11. implication of gigantic international capital movements a. crises about 10 years ago – Asian/Russian crises – due to rapid movement of short term capital – should capital movements be controlled? 12. Attitude of labor unions and international trade 13. Technology and international trade 14. How long can US maintain its trade deficit? a. We’re importing way more than we’re exporting currently 15. The challenge of China – can we persuade them to appreciate currency? a. Huge producers of so many products 16. Outsourcing – some ppl say the only way it is possible is to lower the standard of our living 1/22/07 Need to look at and talk about a certain document – balance of payments of a country Recording of all payments a country makes to rest of world – all transactions Balance of trade is (exports minus imports) Services – like invisible goods – such as transportation, consulting services, tourism, computer programs. Interest payments on debt or loan is also a service item.
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This note was uploaded on 06/13/2011 for the course ECON 420 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

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Internation Econ Notes - ECON 420 International Economics...

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