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International economics is the study of interrelationships among nations.

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Title: International economics is the study of interrelationships among nations.


1
Introduction
  • International economics is the study of
    interrelationships among nations.

2
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports

3
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports

4
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports
  • domestic jobs vs. jobs abroad

5
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports
  • domestic jobs vs. jobs abroad
  • domestic prices vs. international prices

6
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports
  • domestic jobs vs. jobs abroad
  • domestic prices vs. international prices
  • trade deficits (surpluses)
  • --are they harmful ?

7
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports
  • domestic jobs vs. jobs abroad
  • domestic prices vs. international prices
  • trade deficits (surpluses)
  • --are they harmful ?
  • --to whom are they harmful

8
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports
  • domestic jobs vs. jobs abroad
  • domestic prices vs. international prices
  • trade deficits (surpluses)
  • --are they harmful ?
  • --to whom are they harmful
  • -- are they beneficial?

9
Introduction
  • International economics is the study of
    interrelationships among nations. It deals with
    questions such as
  • imports
  • exports
  • domestic jobs vs. jobs abroad
  • domestic prices vs. international prices
  • trade deficits (surpluses)
  • --are they harmful ?
  • --to whom are they harmful
  • -- are they beneficial?
  • -- to whom are they beneficial?

10
Introduction
  • what is so important about the value of the
    dollar ?

11
Introduction
  • is the dollar any different from other
    currencies (international currency)?

12
Introduction
  • This course provide some answers to all of the
    questions posed above. We will discuss the trade
    questions first and then we engage with the
    international finance aspects of the course.

13
Introduction
  • All countries are different. When one deals
    with international economic questions, it is
    difficult to classify and analyze all countries
    and all problems in a same fashion. There are

14
Country Classification
  • Population Size
  • small population large population
  • small countries Fiji, Japan
  • Luxembourg
  • large countries Australia, India Greenland
    China,

15
Terminology
  • GNP Value of all goods and services produced by
    domestic factors of production regardless of
    their location, in or out of the country.

16
Terminology
  • GDP value of all goods and services produced
    within a country.

17
Terminology
  • Therefore, wages paid to a Canadian worker in a
    Ford plant in Canada is included in the U.S GNP
    and in Canada's GDP (not in the U.S.'s GDP).

18
Terminology
  • GDP wages paid to a Canadian worker in a Ford
    plant in the U.S. is included in the US GDP and
    Canadas GNP (it is excluded From Canada's GDP
    but included in the Canadian GNP)

19
Terminology
  • Canadian worker in a Ford Plant
  • in U.S. in Canada
  • U.S. GNP no yes
  • U.S. GDP yes no
  • Canadian GNP yes no
  • Canadian GDP no yes

20
index of openness
  • the ratio of Exports/GDP
  • the ratio of (Imports Exports/GDP

21
index of openness
  • Imports goods purchased by domestic economic
    agents from foreign economic agents
  • Exports goods purchase by foreign economic
    agents from domestic economic agents

22
Pattern of Trade
  • 1-- Industrialized countries account for the most
    of the world trade. They are largest exporters
    and importers in the world.
  • year of total world trade
  • 1965 61
  • 1992 70

23
Pattern of Trade
  • 1-- Industrialized countries account for the most
    of the world trade. They are largest exporters
    and importers in the world.
  • 2-- Over years, pattern of trade has changed.

24
Pattern of Trade
  • Pattern of Trade
  • 1-- Industrialized countries account for the most
    of the world trade. They are largest exporters
    and importers in the world.
  • 2-- Over years, pattern of trade has changed.
    Asian countries have gained a great deal of
    importance in the international trade arena at
    the expense of African and Latin American
    countries.

25
Pattern of Trade
  • Pattern of Trade
  • 1-- Industrialized countries account for the most
    of the world trade. They are largest exporters
    and importers in the world.
  • 2-- Over years, pattern of trade has changed.
    Asian countries have gained a great deal of
    importance in the international trade arena at
    the expense of African and Latin American
    countries. Even though world exports has
    increased by a factor of 22 between 1965 and
    1992, exports of Asian countries (china, Japan,
    NICs) have increased by a factor of 48.

26
Pattern of Trade
  • Pattern of Trade
  • 1-- Industrialized countries account for the most
    of the world trade. They are largest exporters
    and importers in the world.
  • 2-- Over years, pattern of trade has changed.
    Asian countries have gained a great deal of
    importance in the international trade arena at
    the expense of African and Latin American
    countries. Even though world exports has
    increased by a factor of 22 between 1965 and
    1992, exports of Asian countries (china, Japan,
    NICs) have increased by a factor of 48. Their
    share of world exports have increased from 12 in
    1965 to 25 in 1992
  • Asia
  • year share of world exports
  • 1965 12
  • 1992 25
  • Latin America
  • year share of world exports
  • 1965 7
  • 1992 5
  • Africa

27
Pattern of Trade
  • Asia
  • year share of world exports 1965 12
  • 1992 25

28
Pattern of Trade
  • Latin America
  • year share of world exports
  • 1965 7
  • 1992 5

29
Pattern of Trade
  • Africa
  • year share of world exports
  • 1965 5
  • 1992 2

30
Pattern of Trade
  • North America
  • year share of world exports
  • 1965 20
  • 1992 16

31
Pattern of Trade
  • 3-- U.S. is a major trading partner for most
    countries.

32
Pattern of Trade
  • 4-- Distance plays a roll in magnitude of trade.
    The largest U.S. trade partner is Canada France
    , England, and West Germany are each others large
    trade partners. Iran, Pakistan, and Turkey have
    their own trading bloc.

33
What goods nations trade
  • There are several factors explaining the goods
    countries trade
  • 1-- availability of resources is one important
    determinant. One could compare United States and
    Japan. Looking at the U.S. one can observe that
    the US exports a great deal of agriculture
    products. The reason is very simple.

34
What goods nations trade
  • There are several factors explaining the goods
    countries trade
  • 1-- availability of resources is one important
    determinant. One could compare United States and
    Japan. Looking at the U.S. one can observe that
    the US exports a great deal of agriculture
    products. The reason is very simple. The United
    States has
  • --Vast farmland

35
What goods nations trade
  • There are several factors explaining the goods
    countries trade
  • 1-- availability of resources is one important
    determinant. One could compare United States and
    Japan. Looking at the U.S. one can observe that
    the US exports a great deal of agriculture
    products. The reason is very simple. The United
    States has
  • --Vast farmland
  • --enormous forests

36
What goods nations trade
  • There are several factors explaining the goods
    countries trade
  • 1-- availability of resources is one important
    determinant. One could compare United States and
    Japan. Looking at the U.S. one can observe that
    the US exports a great deal of agriculture
    products. The reason is very simple. The United
    States has
  • --Vast farmland
  • --enormous forests
  • --skilled labor

37
What goods nations trade
  • Looking at Japan one can observe that Japan
    exports a great deal of manufactured products.
    The reason is very simple. Japan

38
What goods nations trade
  • Looking at Japan one can observe that Japan
    exports a great deal of manufactured products.
    The reason is very simple. Japan
  • does not have much raw material of its own, but
    it does have a

39
What goods nations trade
  • Looking at Japan one can observe that Japan
    exports a great deal of manufactured products.
    The reason is very simple. Japan
  • does not have much raw material of its own, but
    it does have a
  • very skilled and productive labor force .

40
What goods nations trade
  • Looking at Japan one can observe that Japan
    exports a great deal of manufactured products.
    The reason is very simple. Japan
  • does not have much raw material of its own, but
    it does have a
  • very skilled and productive labor force .
  • Therefore, Japan imports and processes the
    imported raw material and export them as finished
    products.

41
What goods nations trade
  • Looking at Japan one can observe that Japan
    exports a great deal of manufactured products.
    The reason is very simple. Japan
  • does not have much raw material of its own, but
    it does have a
  • very skilled and productive labor force .
  • Therefore, Japan imports and processes the
    imported raw material and export them as finished
    products. This is, in essence, the
    Heckcher-Ohlin theory of international Trade.
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