chapter 1

INTERNATIONAL ECONOMICSProfessor Xu Song

ANHUI UNIVERSITY OF FINANCE & ECONOMICS 0552-3179196(O) [email protected]/23

ANHUI UNIVERSITY OF FINANCE AND ECONOMICS

Books on International EconomicsDominick Salvatore: International Economics, 8th ed. 2004 John Wiley & Sons Inc. & Tsinghua Uni. Press Dennis R. Appleyard & Alfred J. Field. Jr.. International Economics, 6th ed., 2007 The McGraw-Hill, Inc. Robert J. Carbaugh: International Economics, 10th ed. 2006 South-Western College Pub. Paul R. Krugman & Maurice Obstfeld International Economics, 5th ed. 2000 Addison Wesley & Tsinghua Uni. PressANHUI UNIVERSITY OF FINANCE AND ECONOMICS 2/23

Dr. Dominick Salvatore Professor at Fordham Uni. of New York CityANHUI UNIVERSITY OF FINANCE AND ECONOMICS 3/23

Contents1 Introduction 2 The Law of Comparative Advantage 3 The Standard Theory of International Trade 4 Offer Curves and Terms of Trade 5 Factor Endowments and the H-O Theory 6 Economies of Scale, Imperfect Competition 7 Economic Growth and International Trade 8 Trade Restrictions 9 Nontariff Trade Barriers 10 Economic Integration 11 International Trade and Economic Development 12 International Movement and MNCs


4/23

Contents of Each ChapterSix Sections in each chapter Summary ----- 6 paragraphs A Look Ahead--- What is to be discussed in the next chapter Key Terms Questions for Review----13 Questions Problems---- 13 Problems. Appendix----- More advanced knowledge.


5/23

Introduction Chapter 1


6/23

1 Introduction

Know the importance of international economics Define the definition of foreign trade dependence learn the relationship between international trade and the standard of loving Know the purposes of international economic theories and policies


7/23

1 Introduction

Interdependence New protectionism Balance of payment Foreign exchange market Adjustment in the balance of payments Open-economy macroeconomics


8/23

2 International EconomicsIt deals with the economic interdependence among nations. It analyzes the flow of goods and services, payments between nations, policies regulating the flow and their effects on national welfare.


9/23

2 International EconomicsInternational Trade Theory

International Economics International Finance International Trade Policy


10/23

2.1 International Trade TheoryHeckscher-Ohlin Stolper-Samuelson

Comparative Advantage

Factor Price Equalisation

Absolute Advantage

Trade Theory

Rybzcynski

Mercantilism

Immiserising Growth

International Trade and Economic Development


11/23

2.2 International Trade PolicyOther Trade Policies Regional Trade Agreements

Tariffs

International Trade Policy

Tools of the Trade Policy Analysis

International Resource Movements


12/23

2.3 International FinanceForeign exchange markets Balance of payments

International Finance

Open economy macroeconomics


13/23

2.4 Purpose to Study International EconomicsTo analyze the effect of the intl flow of goods, services and factors on the welfare of domestic consumers. To examine or forecast how national policies directed at regulating these intl flows affect domestic welfare. To form intelligent opinions on these matters. To predict and explain the economic events in the world. To understand what is going on in the world and their effects on the world economy. To have a better job in joint ventures !!! Why ?ANHUI UNIVERSITY OF FINANCE AND ECONOMICS 14/23

3 Assumptions in International Trade222 model No trade restrictions Perfect mobility of factors within nations and not internationally Perfect competition No transportation costs


15/23

4 Foreign Trade DependenceWhat

is foreign trade dependence? What is the purpose? How to measure it? -----The ratio of imports and exports of goods and services of a nation to its GDP.Import Export 100 GDP

What nations have the higher degree of foreign export trade dependence?


16/23

4.1 Foreign Trade Dependence in Some Nations1970India Indonesia Korea Pakistan Thailand Japan 3.5 11.5 9.3 4.0 10.0 9.5

1980Developing countries 5.0 28.1 27.5 11.1 20.1 Advanced countries 12.3

19906.0 24.2 25.6 14.0 26.9 9.8

19938.6 23.2 24.8 12.9 29.5 8.6

CanadaAmerica France Germany Italy United Kingdom

19.84.2 12.5 18.6 12.3 15.7

25.78.3 17.5 23.8 17.3 20.5

22.57.2 17.6 27.4 15.6 19.0

26.67.4 16.5 19.9 16.9 19.3 180

SingaporeANHUI UNIVERSITY OF FINANCE AND ECONOMICS

17/23

4.2 Importance of International TradeSome nations can not survive without foreign trade, such as Japan, Germany, Belgium and others. A nation can not produce all the products it needs, for example, US can not produce coffee, cocoa, tea, scotch and other products, they don't have the climate. The economies of all nations are closely related to each other. To improve the standard of living.


18/23

4.3 China GDP and Foreign Trade DependencyYear 1997 1998 1999 2000 2001 2002 2003 GDP (bill. ) 7477.2 7834.5 8206.7 8944.2 9593.3 10239.8 11669.4 Exp+Imp (bill. $) 325.16 323.95 360.63 474.30 509.77 620.80 851.21 Exp+Imp GDP 36.0% 33.7% 36.4% 44.0% 45.0% 50.3% 60% Export (bill. $) 182.79 183.71 194.93 249.20 266.15 325.57 438.37 Export GDP 20.3% 19.1% 19.7% 23.0% 24.0% 26.4% 31.09% Import (bill. $) 142.37 140.24 165.70 225.09 243.61 295.22 412.84 Import GDP 15.7% 14.6% 16.7% 21.0% 21.0% 23.9% 29% Balance ($) +404.2 +434.2 +292.3 +241.1 +225.4 +303.5 +255.4

20042005 2006

13651.515000 24662

1154.71422 1760.7

69.3%80% 67%

593.4762.0 969.1

35.6%43.0% 36.9%

561.4660.1 796.6

33.7%37% 30.3%

+320.0+101.9 +177.5

Data source: China CustomsANHUI UNIVERSITY OF FINANCE AND ECONOMICS 19/23

5 Some Questions1. Import/GDP has _______in recent years in China. (risen, fallen, remained steady) (From 15.7 % in 1997 to 37 % in 2005.) 2. Export/GDP has _______in recent years. (risen, fallen, remained steady) (From 20 % in 1997 to 40 % in 2005.) 3. Which nation is our largest trading partner? ( EU:217.3 billion dollars in 2005) 4. Which is the second largest trading partner? (US: 211.6 billion dollars in 2005 )


20/23

5 Some Questions (2)5.The purpose of trade is to_______. a. improve consume well-being. 6. Work is a ________. a. cost 7. Exports are ________. a. cost b. create jobs. b.benefit b.benefit

8. The objective of international trade is to __________. a. get goods cheaply b.create jobs 9. NAFTA has had a greatest impact on the _____ of U.S. a. inflation rate b.unemployment rate


21/23


22/23


23/23

chapter 1

Documents

Transcript of chapter 1