Ppt in Economics (International Eco) (1)

8/3/2019 Ppt in Economics (International Eco) (1)

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INTERNATIONALECONOMICSPresented by:

Erlyn Joy Magat

Israel Mangalonzo

Clavelle Hershey Mae Orca

Estrelita Vivar


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INTERNATIONAL ECONOMICS

International Economics- is concerned with theeffects upon economic activity of international

differences in productive resources and consumerpreferences and the institutions that affect them. Itseeks to explain the patterns and consequences oftransactions and interactions between theinhabitants of different countries, including trade,investment and migration. economies of scale arebenefits from bulk buying


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International trade - is exchangeof capital, goods, and services across international

borders or territories.


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Theory of International Trade Mercantilism (Thomas Munn)

Theory of Absolute Advantages (Adam Smith)

Theory of Comparative Advantages (DavidRicardo)

Heckscher- Ohlin (HO) Theory


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MERCANTILISM For a nation to be rich and powerful, it needs to

export more and import less.

The more gold a nation had, the richer andpowerful it was


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THEORY OF ABSOLUTEADVANTAGE

In free trade, each nation could specialize in theproduction of those commodities in which it had anabsolute advantage, and import those commoditiesin which it had absolute disadvantage.


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THEORY OF COMPARATIVEADVANTAGE

Even if a nation had a absolute disadvantage in theproduction of both commodities with respect toother nations, mutually advantageous trade couldstill take place.


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HECKSCHER- OHLIN (HO)THEORY

Each nation will export the commodity intensive inits relative abundance and cheap factor, and importthe commodity intensive in its relatively scarcityand expensive factor.


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TYPES OF TRADE PROTECTION Tariff- this is a tax on import products. It raises the

costs to foreign suppliers and reduces theirrevenues thereby reducing the import spending ofthe country.

Quota- this is a fixed limit placed on the quantity of

imports allowed into a country..


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Government Regulations- these are forms ofprotection arising from health and safety standardsand preservation of the environment

Exchange Controls- the Bangko Sentral ngPilipinas restricts the sale dollars (and other forms

of currency) to importers. Only those importers whohave permits are allowed to obtain dollars due tothe necessity of the product they are importing.


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ARGUMENTS FOR THE IMPOSITION OFTARIFF PROTECTION

Infant Industry Argument- this arguments assertsthat a temporary imposition of tariff will cut downimports while local industries learn how to produceat lw enough costs to compete without the help of atariff

Higher Standard of Living Argument- a tariff willpromote high wages because local industriescannot provide competition with foreign competitorsand pay high wages at the same time.


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Increased Employment Argument- it is alsocontended that tariff creates employmentopportunities for labor.

Self-sufficiency Argument- this argument isadvocated to secure economic independence ornational self-sufficiency.


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Foreign Exchange Foreign Exchange Market- is the organizational

framework wherein individuals, businesses, andbanks buy and sell foreign exchange.

Foreign Exchange Rate- is the price of thePhilippine peso versus other currencies. Theexchange rate is made the same in all markets byarbitrage.

Foreign Exchange Arbitrage- is the buying of acurrency when its price is low and selling it when itis high.


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Currency Depreciation- when thevalue of a currency declines because of

market forces. Currency devaluation- when the value

of the currency de clines due to

legislation.


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Flexible vs. Pegged Exchange Rate

Floating Exchange Rate- if the government,

particularly the Central Bank, does not intervene inthe market to defend the currency against itsdepreciation.


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Two types of Flexible Exchange Rates

Manage Float- the BSP will intervene in the market

to smooth out short- run fluctuations in the foreignexchange market without affecting the long- runmovement of the exchange rate.

Dirty Float- a country will artificially keep theircurrency low to induce their exports.


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Fixed Exchange Rate System the CB allows theexchange rate to move within a range of values,and permits that rate to fluctuate in that range.

Two Types of Fixed Exchange rate

Adjustable Peg System the CB will setup amaximum and minimum value of currency.

Crawling Peg System the pegged exchangerate is changed often according to discretion of theCB or some economic indicators.


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DEMAND AND SUPPLY IN THE FOREIGNEXCHANGE MARKET


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A case of an Increased Demand for theUS Dollars


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A Case of an Increased Supply for the USDollars


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The Balance Payment

Balance of Payment- is a summary of informationabout the countrys exports, imports, earnings by

domestic residents on properties located abroad or

outside the country, earnings on domestic assetsowned by foreign residents, international capitalmovements between countries, and officialtransaction by Bangko Sentral ng Pilipinas and

governments.


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Government are trying to keep track records or data

of all money and credit that flows into or out of their

countries so that they can predict what is about tohappen, such as:

To their exchange rate

To their credit rating from the IMF and WB

To their stocks of international reserves.


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Exports- sales of goods and services to peopleand firms of other countries

Imports- purchases of goods and services frompeople and firms of other countries.

Net Exports- the balance of international trade,equals export minus imports.

GDP= C + I + G (X-M)


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DETAILS OF BALANCE PAYMENT

The balance payment is listed in four sections:

I. The Current- Account Balancethis summarizes the difference between total

exports of goods and services and the totalimports.

Current account deficit- export of goods andservices fall short of imports of goods andservices plus net unilateral transfer.


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II. The Capital Account

this records all transaction pertaining to privateforeign investments, grants and loans, such ascapital movements.

III. Statistical Discrepancy-

net sum of all unrecorded transactions.

IV. Official Monetary Reserve or Cash Accountthese are assets of Central Bank in the form of

gold reserves, currency reserves and internationalpaper gold or SDRs.


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THANK YOU

Ppt in Economics (International Eco) (1)

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