Need of the study of International Economics

8/15/2019 Need of the study of International Economics

1/16

IMPORTANCE OF

STUDY OF

INTERNATIONAL

ECONOMICSSubmitted to :

Prof. Madan Lal

Submitted By :-

SIDDHANT KAPOOR

Roll No. - 40


2/16

What Is International

Economics About?

International economics is about how

nations interact through trade of goodsand services, through ows of money andthrough investment.

International economics uses the same

fundamental methods of analysis as otherbranches of economics, because themotives of individuals and rms are thesame in international trade as they are in

domestic transactions.


3/16

What Is InternationalEconomics About? (contd.)

International economics is an old subject,but it continues to grow in importance ascountries become tied to the internationaleconomy.

Nations are more closely linked throughinternational trade than ever before.


4/16

Importance of IE The subject matter of international economics

consists of issues raised by the economicinteraction between sovereign states. eventhemes recur throughout the subject !

The "ains from Trade The #attern of Trade

#rotectionism

The $alance of #ayments%&change'(ate )etermination

International #olicy *oordination

The International *apital +arket


5/16

The Gains from Tradehen a buyer and a seller engage in a voluntary

transaction, both receive something that theywant and both can benet from it.

ith a nite amount of resources, countries canuse those resources to produce what they aremost productive at, then trade those products forgoods and services that they want to consume.

Trade is predicted to benet a country by making

it more e-cient when it e&ports goods which useabundant resources and imports goods which usescarce resources.

hen countries specialie, they may also be more

e-cient due to large scale production.


6/16

The Pattern of Trade

ho sells what to whom

*limate and resources determine the trade

pattern of several goods.


7/16

Protectionism+any governments are trying to shield certain

industries from international competition.

This has created the debate dealing with the

costs and benets of protection relative to freetrade.

#olicy makers a/ect the amount of trade through

tarifs! a ta& on imports or e&ports,

quotas: a 0uantity restriction on imports ore&ports,

export subsidies! a payment to producers thate&port.


8/16

The Balance of Payments

The record of a country1s transactions withthe rest of the world is called the balance

of payments.

%&plaining the balance of payments, and

diagnosing its signicance, is a maintheme of international economics.


9/16

Echan!e"#ate $etermination

2ne of the key di/erences betweeninternational economics and other areas ofeconomics is that countries have di/erent

currencies.It is usually possible to convert one currency

into another, although relative prices ofcurrencies may change over time, sometimes

drastically.ome of the world1s most important e&change

rates uctuate minute by minute and the role ofchanging e&change rates remains at the center

of the international economics story.


10/16

International Policy%oordination

The international economy comprisessovereign nations, each free to choose its owneconomic policies. 3nfortunately, in an

integrated world economy one country1seconomic policies usually a/ect othercountries as well.

4 fundamental problem in international

economics is how to produce an acceptabledegree of harmony among the internationaltrade and monetary policies of di/erentcountries without a world government that

tells countries what to do.


11/16

The International %apital&ar'et

In any sophisticated economy there is ane&tensive capital market! a set ofarrangement by which individuals and rmse&change money now, for promises to pay inthe future.

International capital markets di/er inimportant ways from domestic capitalmarkets. They must cope with specialregulations that many countries impose on

foreign investment5 they also o/er the benetof hi her returns and chea er borrowin


12/16

Truealse

International economics is about hownations interact through trade.

International capital markets do not provide

any benets as compared to a domesticcapital markets.

4 0uota is a 0uantity restriction on importsor e&ports.

*limate and resources do not a/ect thepattern of trade of a country.

Nations are more closely linked through

international trade.


13/16

&ultiple %hoice *uestions*apital market is a set of arrangement by which

individuals and rms e&change !

6. "oods

7. +oney

8. ervices

9. None of the above

. #olicy makers control the amount of trade through !

6. :uotas

7. %&port ubsidies

8. Tari/s

9. 4ll of the above


14/16

The subject matter of International %conomics

includes !6. The "ains from Trade

7. #rotectionism

8. The $alance of #ayments

9. 4ll of the above

hen countries specialie in production, they

become !6. less e-cient.

7. more e-cient

8. No e/ect


15/16

#eferencesInternational %conomics by ;rancis

*herunilam

International %conomics < Theory =#olicy by >rugman, 2bstfeld = +elit


16/16

THANK YOU

Need of the study of International Economics

Documents

Transcript of Need of the study of International Economics