INTCLASSL - International Economics & Macro Why do...

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1 International Economics & Macro ± Why do economists generally favor free trade? Why restrict trade? How? ± How do exchange rates matter to the macro economy? ± How are exchange rates determined in the short-run? The long-run? ± What’s ‘bad’ about a current account deficit? A Financial account surplus? 1 ± 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 NOW ± Q&A Mon 5/9 noon MI100 ² (Thurs 5/5 2pm SC219 – H1) ± Review Guide & Essential Questions & ht A 850 4 chat room ± Grade book problems-check! NOW ± Grading explanation ± Impt Dates 5/2 last class-ec-drop and hand in, inv game ² FINAL EXAM B+ 800 B 780 C+ 740 C 670 D 600 F< Investment Game ² Derivatives 5 6
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3 What? 7 Trade Facts ± Net Exports X-M ² <0 – trade deficit >0 trade surplus ± Current Account Deficit ² X-M $250 bil in 2009 ² Exports $2.16 trillion ² Imports $2.41 tril1ion 8 ² Trade Deficits since 1976 ± Deficit on Goods, surplus on services ² Harm? D=C+I+G+X-M ± Largest Trading Partners ² Canada: China: Mexico: Japan: Germany:United Kingdom: South Korea:France:Taiwan:Singapore: 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; 9 ± economies of scale ² More output/production possible for all ² transmission of ideas ² international competition ² Trends: GATT, EU, NAFTA, CAFTA, WTO
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4 How to Restrict Trade? ± How ² Tariffs ² Quotas ± Japanese cars 1981 ² Dumping Mechanisms 10 ± Steel ² Subsidies ± Agriculture ± Airbus/ Boeing Why Restrict Trade? ± Arguments used ² Save Jobs ² Unfair Competition due to: ± weaker environmental/ safety standards ± exploitation ± Answers ² Job cost too high to consumers ± -subsidize displaced workers ± Helps environmental/ safety standards improve abroad Exploitation is really benefi 11 ± 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 ± Dumping illusory ² Why Protect Infant Industries? ² Defense/ Strategic interests ² Retaliation Is Globalization Bad for the U.S.? (and is the world flat?) ± Free trade ² Comparative Advantage – Gains from Trade ² Economies of Scale ² International transmission of ideas I t ti l C titi 12 ² International Competition ± Flat World – Globalization ² gains ² larger labor pool ² how to compete? W/MP
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5 Exchange Rates and Currency Markets ± Exchange rates ² currency per $ JPY/US$ =84.35 ² $ per currency US$/JPY=.0119 ²
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This note was uploaded on 10/25/2011 for the course ECONOMICS 01:220:103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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INTCLASSL - International Economics &amp; Macro Why do...

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