International economics deals with the effects of international differences in resources and preferences on economic activity, and the international institutions that influence them. It uses economic tools to analyze international trade and transactions. International economics is both a theoretical and applied field that considers models like comparative advantage. It also examines the welfare effects of trade and the roles of institutions like the IMF and World Bank. The scope of international economics includes topics like technical progress, capital flows, trade agreements, export promotion, international division of labor, price stability, and more. International trade allows countries to specialize, access a greater variety of goods, achieve economies of scale, transfer technology, create more jobs, and generate foreign reserves.

1. International
Economics
Dr.R.Alagesan,
Assistant Professor of Economics,
Department of Economics,
Mannar Thirumalai Naicker College,
Madurai

2. Meaning
• International economics is
concerned with the effects
upon economic activity from
international differences in
productive resources and
consumer preferences and the
international institutions that
affect them.

3. Nature of International Economics
• The international economics is an applied branch of general economics. Particularly it is an applied
branch of macroeconomics. It uses economic tools and principles to judge the economics decisions in
case of international trade and transaction.
• International economics is a theoretical economics. This is because like other economics, it has own
models, principles, and laws. As for example H.O. Theory, Leontief Paradox.
• International economics is a normative economics. It means that the international economics is
concerned with welfare aspect of the trade and transaction. Different international agencies were
established to look after the welfare aspect of the trade relations. As for example - The world bank,
IMF, etc. (iv) The international economics is a descriptive economics also which describes the flows of
different policies among the different countries. As for example - free trade, quotas, etc.
• International economics is also take into account international human relationships among different
countries of the world. It promotes international brotherhood, peace and unification.

4. Scope of
International
Economics
Technical
Progress
Easy flow of
Capital
International
Co-Operation
Growth of
international
agencies
Promotion of
export trade
International
Division of
labour
Promotion of
peace and
Brotherhood
Stabilization
of Prices

5. IMPORTANCE OF INTERNATIONAL TRADE
MAKE MAXIMUM USE
OF RAW MATERIALS
COMPARATIVE BENEFIT GREAT CHOICE FOR
USERS
SPECIALIZATION AND
ECONOMY – MORE
EFFICIENCY
BUSINESS IN SERVICE
SECTOR
GLOBAL DEVELOPMENT
AND ECONOMIC
DEVELOPMENT

6. Internal Trade International Trade
Definition
Internal trade is trade that involves buying and selling taking place between two parties
which are located within the political and geographical boundaries of a country
International trade is referred to as a trade that involves buying and selling of goods
between two individuals or businesses located in two different countries or it can be trade
between two different countries
Currency exchange
There is no exchange of currency as trade takes place within the boundaries of the nation Exchange of currency is there between the two countries/individuals/businesses involved
in the trade
Trade Restrictions
No trade restrictions for internal trade International trade has different restrictions as the two countries involved in trade have
different policies with regards to trade
Transportation Cost
Transportation cost is less when trade is taking place within the borders of a country Comparatively higher transportation costs as goods need to be transported across the
world
Goods traded
Only those goods and services are traded that are available in the country Helps countries to trade goods that are produced in surplus or purchase goods that are
scarcely available
Foreign reserve
Does not generate any foreign reserve International trade generates foreign reserves for the two trading countries

7. Advantages of
International Trade
• Comparative Advantage
• Economies of Scale
• Competition
• Transfer of technology
• More job creation