Ch. 1: International economics Flashcards
Which was the first real exposition of an economic model made in 1758?
The essay “Of the Balance of Trade” by the Scottish philosopher David Hume
How much have the importance of international trade grown between 1960 and 2015?
IT has tripled in importance compared to the economy as a whole.
In the US, is it import or export that has grown the most between 1960 and 2015?
Import has grown more. There is an excess of imports over exports. The US pays for the excess using inflows of capital (Money invested by foreigners in the US)
What are the 7 themes that recur throughout the study of international economics?
(1) the gains from trade
(2) the pattern of trade
(3) protectionism
(4) the balance of payments
(5) exchange rate determination
(6) international policy coordination
(7) the international capital markets
“Real wage of less-skilled workers in the US is declining, even though the country as a whole is growing richer. It is due to growing exports of manufactured goods from low-wage countries”. What is this telling us?
Although nations generally gain from international trade, it is quite possible that international trade may hurt particular groups within nations—in other words, that international trade will have strong effects on the distribution of income.
What can explain the pattern of trade without looking at any theories?
The climate and natural resources.
Who is a part of NAFTA and when was it founded?
North American Free trade agreement (NAFTA) between US, Canada and Mexico was done in 1993.
Which agreement was later establishing the World trade organization and in what year?
Uruguay round agreement in 1994.
How can it be said that there has been “Backlash” against globalization?
In 2016, UK left the EU.
“Make America Great again” presidential campaigns
Which international organizations has governed the international trade policies for almost 70 years?
- The general agreement on tariffs and trade (GATT)
* The world trade organization since 1994
How does international capital markets differ from domestic capital markets?
They must cope with special regulations that many countries impose on foreign investment; they also sometimes offer opportunities to evade regulations placed on domestic markets.
What are the risks associated with international capital markets?
• Currency fluctuations: If the euro falls against the dollar, U.S. investors who bought euro bonds suffer a capital loss
• National default: A nation may simply refuse to pay its debts or cannot. There may be no effective way for the creditors to bring it to court.
o OBS: Fear of default by highly indebted EU nations have been a major concern in recent years.
Which two broad subfields can economics of the international economy be divided into?
• The study of international trade
o Focuses on the real transactions, including transactions of tangible goods.
• The study of international money
o Focuses on the monetary side, so on the financial transactions ex. foreign purchases of U.S. dollars.
In the real world, there is no simple dividing line between trade and monetary issues.
