20 International Factor Movements, 2

20 International Factor Movements, 2 - International Factor...

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1 International Factor Movements, 2 • International Capital Mobility –In troduc t ion – Inter-Temporal Production Possibilities Frontiers – Inter-Temporal Trade in a Closed Economy – Inter-Temporal Trade between Open Economies – Foreign Direct Investment and Multinational Firms Introduction •S av ing ( lending ) and investment ( borrowing ) can be interpreted as a kind of trade or exchange in consumption goods. – This trade is NOT a trade of one consumption good for another at a given point in time . – This trade is for one consumption good today for other goods in the future . – This is known as inter-temporal trade . Inter-Temporal PPF’s • Every economy faces a trade-off between current consumption and future consumption. Inter-Temporal PPF’s • Assumptions: – Only one good: widgets. – Only two time periods:
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2 Inter-Temporal PPF’s Inter-Temporal Isovalue Lines • The economy’s isovalue lines now measure the value today of production that takes place over time . – What is the value today of future production?
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20 International Factor Movements, 2 - International Factor...

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