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1.0 International Economics1_INTRODUCTION_ MPANDE.pptx
1. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 1
An Introduction to
International Economics
UNIT 1: Introduction
Dominick Salvatore
John Wiley & Sons, Inc.
Ed. By: Daniel Mpande
2. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 2
What is International Economics?
• International trade in goods and services
– An example: Sony Televisions
3. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 3
What is International Economics?
• International trade in goods and services
– A key issue – its not just imports!
• Exports of Boeing Aircraft
• Exports of Microsoft Software
4. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 4
What is International Economics?
• International trade in goods and services
– A key issue – its not just imports!
– Its also not just for consumers!
• Trade in component parts
• Monitors for Dell Computers
5. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 5
What is International Economics?
• International trade in goods and services
– A key issue – its not just imports!
– Its also not just for consumers!
– Services, not just goods!
• Lloyd’s of London
6. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 6
What is International Economics?
• International trade in goods and services
– A key issue – its not just imports!
– Its also not just for consumers!
– Services, not just goods!
– International trade is expanding
7. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 7
What is International Economics?
• International trade in goods and services
– A key issue – its not just imports!
– Its also not just for consumers!
– Services, not just goods!
– International trade is expanding
Value of World Merchandise Exports (1995 = 100)
0
20
40
60
80
100
120
140
1950 1960 1970 1980 1990 2000
Source: World Trade Organization
8. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 8
What is International Economics?
• International trade in goods and services
• International ownership of assets
– Examples
• Foreign stock ownership
• Automobile assembly plants
– Toyota WWW link
• US government debt
9. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 9
What is International Economics?
• International trade in goods and services
• International ownership of assets
• Currency exchange
– International transactions require conversions
between currencies
– Foreign exchange markets
• Federal Reserve Bank Exchange Rate Data WWW link
10. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 10
What is International Economics?
• International trade in goods and services
• International ownership of assets
• Currency exchange
• International organizations
– World Trade Organization
• WWW link
– International Monetary Fund
• WWW link
– European Union
• WWW link
11. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 11
Standard of Living
• The International Economy generates
Interdependence
– Economic growth in the United States spurs
increased demand for imports
– Increased import demand by the United States
generates economic growth in other countries
12. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 12
Standard of Living
• The International Economy generates
Interdependence
• Sources of potential gain
– Access to items not available domestically
• Coffee
• Bananas
• Tin
• Tungsten
13. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 13
Standard of Living
• The International Economy generates
Interdependence
• Sources of potential gain
– Access to items not available domestically
– Access to lower cost products
– Access to greater product variety
14. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 14
Standard of Living
• The International Economy generates
Interdependence
• Sources of potential gain
• Is it always a gain?
– Import competing sectors may experience
production and job losses
– This loss is at least partially (and potentially,
completely) offset by gains in the exporting
sectors
15. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 15
Subjects in International Economics
• International Trade Theory
– Analyzes the basis of and the gains from
international trade
– Focuses on the microeconomic aspects of the
international economy
16. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 16
Subjects in International Economics
• International Trade Theory
• International Trade Policy
– Examines the reasons for and the effects of
restrictions on international trade
– Analyzes the implications for International
Trade Theory of such restrictions
17. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 17
Subjects in International Economics
• International Trade Theory
• International Trade Policy
• Balance of Payments
– A summary statement of all the international
transactions of the residents of a nation with the
rest of the world during a particular period of time,
usually a year.
– Provides a statistical summary of the size of
international trade and international asset
ownership for a country
18. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 18
Subjects in International Economics
• International Trade Theory
• International Trade Policy
• Balance of Payments
• Foreign Exchange Markets
– The institutional framework for the exchange of
one national currency into another
– Part of the study of International Finance (or
Open-Economy Macroeconomics) that is
concerned with the macroeconomic implications
of the International Economy
19. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 19
Subjects in International Economics
• International Trade Theory
• International Trade Policy
• Balance of Payments
• Foreign Exchange Markets
• Adjustments in the Balance of Payments
– Focuses on the relationship between internal and
external aspects of the economy
– Examines how disequilibria lead to
macroeconomic adjustment under difference
international monetary systems
20. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 20
Current International Economic
Problems
• Trade Protectionism in Industrial Countries
– What are the reasons for this protection?
– What are the implications of this protection for the
industrial countries?
– What are the implications of this protection for the
rest of the world?
– How do regional trade blocks (the NAFTA, the
European Union, etc.) complicate efforts to reduce
this protection?
21. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 21
Current International Economic
Problems
• Trade Protectionism in Industrial Countries
• Excessive Fluctuations and Large
Disequilibria in Exchange Rates
– Large exchange rate fluctuations may disrupt
international trade and harm economic growth
– What is the source of these fluctuations?
– How can the international financial system be
reformed to eliminate these fluctuations?
22. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 22
Current International Economic
Problems
• Trade Protectionism in Industrial Countries
• Excessive Fluctuations and Large Disequilibria in
Exchange Rates
• Financial Crises in Emerging Market
Economies
– The causes and consequences of a sudden
collapse in the value of a currency of an emerging
economy
23. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 23
Current International Economic
Problems
• Trade Protectionism in Industrial Countries
• Excessive Fluctuations and Large Disequilibria in
Exchange Rates
• Financial Crises in Emerging Market Economies
• High Structural Unemployment and Slow
Growth in Europe and Stagnation in Japan
24. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 24
Current International Economic
Problems
• Trade Protectionism in Industrial Countries
• Excessive Fluctuations and Large Disequilibria in
Exchange Rates
• Financial Crises in Emerging Market Economies
• High Structural Unemployment and Slow Growth
in Europe and Stagnation in Japan
• Job Insecurity from Restructuring and
Downsizing in the United States
25. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 25
Current International Economic
Problems
• Excessive Fluctuations and Large Disequilibria in
Exchange Rates
• Financial Crises in Emerging Market Economies
• High Structural Unemployment and Slow Growth
in Europe and Stagnation in Japan
• Job Insecurity from Restructuring and Downsizing
in the United States
• Restructuring Problems of Transition
Economies
26. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 26
Current International Economic
Problems
• Excessive Fluctuations and Large Disequilibria in
Exchange Rates
• Financial Crises in Emerging Market Economies
• High Structural Unemployment and Slow Growth
in Europe and Stagnation in Japan
• Job Insecurity from Restructuring and Downsizing
in the United States
• Restructuring Problems of Transition Economies
• Deep Poverty in Many Developing Countries
27. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 27
Globalization
• What is globalization?
– Increasing international economic connections
• International Trade
• International Asset Ownership
28. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 28
Globalization
• What is globalization?
– Increasing international economic connections
– Increasing role of International Organizations in
constraining domestic policies
29. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 29
Globalization
• What is globalization?
– Increasing international economic connections
– Increasing role of International Organizations in
constraining domestic policies
– Increasing cultural homogeneity
30. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 30
Globalization
• What is globalization?
– Increasing international economic connections
– Increasing role of International Organizations in
constraining domestic policies
– Increasing cultural homogeneity
– Increased domestic economic growth caused by
expanded international connections
• Potential harm?
– Environmental concerns
31. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 31
Globalization
• What is globalization?
• The Anti-Globalization movement
– A loose coalition of groups opposed to
globalization
– Concerns
• Environmental damage
• Loss of domestic labor protections
• Erosion of domestic sovereignty
32. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 32
Organization of the Text
• Part One: Chapters 2-4
– International Trade Theory
33. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 33
Organization of the Text
• Part One: Chapters 2-4
• Part Two: Chapters 5-6
– International Trade Policies
34. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 34
Organization of the Text
• Part One: Chapters 2-4
• Part Two: Chapters 5-6
• Part Three: Chapters 7-9
– International Asset Ownership
35. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 35
Organization of the Text
• Part One: Chapters 2-4
• Part Two: Chapters 5-6
• Part Three: Chapters 7-9
• Part Four: Chapters 10-12
– Balance of Payments and Exchange Rate Markets
36. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 36
Organization of the Text
• Part One: Chapters 2-4
• Part Two: Chapters 5-6
• Part Three: Chapters 7-9
• Part Four: Chapters 10-12
• Part Five: Chapters 13-14
– Open-Economy Macroeconomics
37. Dale R. DeBoer
University of Colorado, Colorado Springs
1 - 37
Organization of the Text
• Part One: Chapters 2-4
• Part Two: Chapters 5-6
• Part Three: Chapters 7-9
• Part Four: Chapters 10-12
• Part Five: Chapters 13-14
• Part Six: Chapters 15-16
– The International Economy in Operation