Chapter 1 Flashcards
Who is the author of the International economics reference?
Paul R. Krugman
What Is International Economics About?
-International trade topics
-International finance topics
-International trade versus finance
-about how nations interact
International trade topics
Gains from trade, explaining patterns of trade, effects of government policies on trade
International finance topics
Balance of payments, exchange rate determination, international policy coordination and capital markets
how nations interact ?
Through trade of goods and services, flows of money, and investment.
This is an old subject, but continues to grow in importance as countries become tied more to the international economy.
International economics
T or F
Nations are now more closely linked than ever before.
T
U.S. exports and imports as shares of gross domestic product have been on a ____________ trend.
long-term upward
International trade has roughly______ in importance compared to the economy as a whole in the past 50 years.
tripled
Both imports and exports fell in what year due to the ______
2009, recession.
Compared to the United States, other countries are even more tied to _______
international trade.
Other countries’ imports and exports as a share of GDP are substantially _____
higher
The __________, due to its size and diversity of resources, relies less on international trade than almost any other country.
United States
What is the no. 1 export product of the Philippines.
Electronic products
_______is probably the most important insight in international economics.
gains from trade
Countries selling goods and services to each other almost always generates _____
Mutual benefits.
Gains from trade
- When a buyer and a seller engage in a voluntary transaction, both can be made better off.
- How could a country that is the most (least) efficient producer of everything gain from trade?
- Trade benefits countries by allowing them to export goods made with relatively abundant resources and imports goods made with relatively scarce resources.
- When countries specialize, they may be more efficient due to larger-scale production.
- Countries may also gain by trading current resources for future resources (international borrowing and lending) and due to international migration.
Norwegian consumers import ______ that they would have a hard time producing.
oranges
How could a country that is the most (least) efficient producer of everything gain from trade?
Countries use finite resources to produce what they are most productive at (compared to their other production choices), then trade those products for goods and services that they want to consume.
Countries can specialize in production, while consuming many goods and services through trade.
Trade benefits countries by allowing them to export goods made with_______ resources and imports goods made with ________resources.
relatively abundant, relatively scarce
When countries _________, they may be more efficient due to larger-scale production.
specialize
Countries may also gain by trading current resources for future resources and due to international migration.
(international borrowing and lending)
______ is predicted to benefit countries as a whole in several ways, but trade may harm particular groups within a country.
Trade
_________________can harm the owners of resources that are used relatively intensively in industries that compete with imports.
International trade
Trade may therefore affect the _________ within a country.
distribution of income
The _______describes who sells what to whom.
pattern of trade
Differences in ______and ______explain why Brazil exports coffee and Saudi Arabia exports oil.
climate , resources
Why some countries export certain products can stem from differences in:
Labor productivity
Relative supplies of capital, labor and land and their use in the production of different goods and services
Policy makers affect the amount of trade through
tariffs:
quotas:
export subsidies:
a tax on imports or exports
tariffs:
a quantity restriction on imports or exports,
quotas:
a payment to producers that export,
export subsidies:
are often chosen to cater to special interest groups, rather than to maximize national welfare.
Trade policies
Governments tend to adopt _______, then negotiate them down in exchange for reduction in trade barriers of other countries.
tariffs
Exchanging risky assets such _______can benefit all countries by diversification that reduces the variability of income – another source of gains from trade.
as stocks and bonds
Most international trade involves .
monetary transactions
Many ________have important consequences for international trade.
monetary events
Governments measure the value of exports and imports, as well as the value of financial assets that flow into and out of their countries.
Balance of Payments
, where countries import more than they export in value, may be offset by net inflows of financial assets.
Trade deficits
measures the balance of funds that central banks use for official international payments.
The official settlements balance, or the balance of payments,
All three values are measured in the
government’s national income accounts.
are an important financial issue for most governments.
Exchange rates
measure how much domestic currency can be exchanged for foreign currency
Exchange rates
Exchange rate affect
how much goods denominated in foreign currency (imports) cost in the domestic country.
how much goods denominated in domestic currency (exports) cost in foreign markets.
T or F
Some exchange rates change continually (float) while others are fixed for periods of time.
T
In an integrated economy, one country’s economic policies usually affect other countries as well, leading to the need for some degree of policy coordination.
International Policy Coordination
where money is exchanged for promises to pay in the future,
Capital markets,
Capital Market have special concerns in an international setting:
Currency fluctuations can alter the value paid.
Countries, especially developing ones, might default on debt.
are arrangements by which individuals and firms exchange money now for promises to pay in the future.
Capital markets
cope with special regulations that countries impose on foreign investments
International capital markets
Special risks of currency fluctuations and national default;
International capital markets
Sometimes offer opportunities to evade regulations placed on domestic markets
International capital markets
focuses on transactions involving movement of goods and services across nations.
International trade
International trade theory (Econ/Trade Chapters 2–8) and policy (Econ/Trade Chapters 9–12)
International trade
focuses on financial or monetary transactions across nations.
International finance
International monetary theory (Econ Chapters 13–18/Finance Chapters 2-7) and policy (Econ Chapters 19–22/Finance Chapters 8-11)
International finance
Increasing international economic connections
International Trade
International Asset Ownership
Globalization
Increasing role of International Organizations in constraining domestic policies
Globalization
Increasing cultural homogeneity
Globalization
Increased domestic economic growth caused by expanded international connections
Potential harm?
Environmental concerns
A loose coalition of groups opposed to globalization
The Anti-Globalization movement
The Anti-Globalization movement concerns
Environmental damage
Loss of domestic labor protections
Erosion of domestic sovereignty
