INTLCLASS - 1 1 International Economics and Macro ¡ Key...

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Unformatted text preview: 1 1 International Economics and Macro ¡ Key Questions ¢ Why do economists generally favor free trade? Why restrict trade? How? ¢ How are exchange rates determined in the short-run? The long-run? How do exchange rates matter? ¢ What’s bad about a current account deficit? A Financial account surplus? ¢ What’s wrong with globalization? Globalization is good / antiwto 2 In the News? 3 2 4 Course Issues ¡ Final Exam Conflicts – see me with documentation ¡ Review Guide ¡ Essential Questions ¡ Grade book problems ¡ Q&A sessions 5 Investment Game ¢ ¢ ETFs, Hedge Funds, Bonds ¢ Next/Last - derivatives 6 Trade Facts ¢ Net Exports X-M ¡ <0 – trade deficit >0 trade surplus ¢ Current Account Deficit ¡ X-M $738.6 bil in 2007 ¡ Exports $2.4 trillion ¡ Imports $3.04 tril1ion ¡ Trade Deficits since 1976 ¡ Harm? D=C+I+G+X-M ¢ Largest Trading Partners ¡ Canada: China: Mexico: Japan: Germany:United Kingdom: South Korea:France:Taiwan:Singapore: 3 7 Why do Economists Generally Favor Free Trade? ¡ Comparative Advantage ¢ Specialization in lowest opportunity cost ¡ Versus absolute advantage ¡ From different endowments of resources, abilities ¡ diversity of tastes; ¡ economies of scale ¢ More output/production possible for all ¢ transmission of ideas ¢ international competition ¢ Trends: GATT, EU, NAFTA, CAFTA 8 How to Restrict Trade? ¡ How ¢ Tariffs ¢ Quotas ¡ Japanese cars 1981 ¢ Dumping Mechanisms ¡ Steel ¢ Subsidies ¡ Agriculture ¡ Airbus/ Boeing 9 Why Restrict Trade? ¡ Arguments used ¢ Save Jobs ¢ Unfair Competition due to: ¡ weaker environmental/ safety standards ¡ exploitation ¡ How to compete with low wages ¢ Dumping / Predatory Competition ¢ Protect Infant Industries ¢ Defense/ Strategic interests ¢ Retaliation ¡ Answers ¢ Job cost too high to consumers ¡-subsidize displaced workers ¡ Helps environmental/ safety standards improve abroad ¡ Exploitation is really benefit ¡ Compete with low wages with high productivity ¡ Dumping illusory ¢ Why Protect Infant Industries?...
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This note was uploaded on 09/30/2011 for the course ECONOMICS 103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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INTLCLASS - 1 1 International Economics and Macro ¡ Key...

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