Subject Matter Of International Economics

Question 1

What is the subject matter of International Economics?

Answer 1

The problems pertaining to economic interaction between the countries comprising of
1. The gains from trade
2. The pattern of trade
3. Protectionism
4. The BOP
5. Exchange Rate Determination
6. International Policy Coordination
7. The International Capital Market

Question 2

Why is the Gains From Trade a subject matter if international economics?

Answer 2

1. Nobody thinks that Norway should grow its own oranges .
2. Mutual benefit to countries when they sell their goods and services to each other.

Question 3

What do usually economies fear off during their trade with less or more potential trading partners?

Answer 3

1. India thought that it might loose its markets to technologically advanced trading partners because of its incompetency, leading to industrial disasters.
2. The USA thot that NAFTA would bring about cheap labour from Mexico, thereby alarming the employment opportunities and the standards of living while trading with less advanced countries -“ Giant Sucking Ground “.

Question 4

What is the central preoccupation of the Pattern of Trade?

Answer 4

Who sells What to Whom ?

Question 5

What are some of the aspects of Pattern of Trade amongst the international economists?

Answer 5

1. Climate and resources - why Brazil exports coffee and Saudi Arabia exports oil.
2. Why does Japan manufactures automobiles and USA manufactures aircrafts.
3. The difference in the labour productivity internationally was explained in 19 th century by David Ricardo as a, factor influencing pattern of international trade.
4. The most important explanation concerning the pattern of trade came in 20th century as an interaction between the relative supply of national resources like capital, labour, land and their use on the production of different goods and services.

Question 6

When did Protectionism start? And How?

Answer 6

1.16th century the emergence of the nation-states
2. These nations provided subsidies to their domestic goods and imposed tariffs on the imported goods, ad a part of protectionism.

Question 7

When did the world realise the disadvantages and wat kind of disadvantages were there of Protectionism?

Answer 7

1. After the second world war.
2. For international peace and prosperity.

Question 8

When did liberalisation start taking place?

Answer 8

1.In 1993, with NAFTA between USA, Mexico and Canada.
2. 1994 , the Uruguay Round led to the birth of WTO.

Question 9

What does international economics has to do with Protectionism?

Answer 9

To define
1. the effects of trade policies,
2. the level of government intervention required
3. Cost-benefit analysis

Question 10

Which two countries were enjoying the trade surpluses in the year 1998?

Answer 10

The China and South Korea by $40 billion each.

Question 11

Why was China criticised for its trade surplus by the USA?

Answer 11

The USA was running under trade deficit since 1982 and with China having trade surplus was accused of indulging in unfair trade practices of manipulation of curency and defying other rules.

Question 12

Why should the BOP be analysed in the context of economic analysis?

Answer 12

1. in discussing with the FDI with MNCs.
2. in relating international transactions to national income accounting.
3. in discussing every aspect of monetary policy.

Question 13

How were the exchange rates determined earlier?

Answer 13

The exchange rates were determined earlier by marketplace rather than the government actions.

Question 14

What is Euro?

Answer 14

A common currency introduced for most of the Western Nations in he year 1st January, 1999 was Euro.

Question 15

How had the Euro helped its exporters gain in 2002?

Answer 15

The value of Euro was $0.85 which was $1.17 in 1991.However it again rose to more than $1.40 in 2007, with a slid back of value $1.29 in the 2010.

Question 16

How were the currencies fixed prior to WW1 and after WW2?

Answer 16

The major currencies of the world were fixed in terms of gold. While after WW2 it was fixed in terms of U.S. dollar.

Question 17

What is the importance of international policy coordination?

Answer 17

1. The reunification of the Western and the Eastern Germany brought about measures required to control the inflation, a result of the aforementioned, thereby, bringing recession in the Western Europe.
2. Therefore, the Germany’s Bundesbank increased the interest rates in 1990
3. This led to a conflict of interests among nations.

Question 18

Why do countries suffer loss even with similar goals?

Answer 18

Since these countries fail at coordinating their policies by producing acceptable degree of harmony among the
• international trade and
• monetary policies
of different countries.

Question 19

Which sort of coordination is the most new and uncertain topic in the, arena of coordination after the coordination on international trade policies?

Answer 19

The coordination of the international macroeconomic policies.

Question 20

Why was there a debt crisis from 1970-1990?

Answer 20

1. In 1970s the developed nations started funding the poorer countries of Latin American.
2. This was followed by Mexico unable in paying of its debts in 1982.
3. This was later the norm for every other Latin American country, thereby the debt crisis continued till 1990s.

Question 21

What happened to the 1990s investments into the poorer nations once again?

Answer 21

1. The poorer nations of Latin American and Asia were once again infused with the investments in their respective “emerging markets”.
2. However, this boom got eclipsed sooner.
3. 🇲exico 🇲🇽 experienced another financial crisis at the end of 1994.
4. Asia was caught up in the crisis by the beginning of the summer of 1997.
5. Argentina 🇦🇷 suffered the huge crisis in 2002.

Question 22

What is meant by capital market?

Answer 22

The capital market is an arrangement wherein the individuals abs firms exchange money now for promises to pay in the future.

Question 23

Since when did the international capital market gained importance?

Answer 23

Since the growth of international trade in 1960s, international capital market gained importance.

Question 24

How did the international capital market startesd functioning?

Answer 24

1.In 1970s, with the Middle East Countries putting their oil revenues in the banks of London or NewYork.
2. This money was later given as debt to the poorer nations of Latin America and Asia.
3. During 1980s, Japan started investing into US after its booming exports.
4. Japan also started establishing a growing number of US Subsidiaries of Japanese🇯🇵 Corporations.
5. China 🇨🇳 is too trying to funnel its export earnings into a range of foreign assets.
6. Chinese government 🇨🇳👲holds foreign assets that includes dollars as international reserves.

Question 25

How are international capital markets different from the domestic capital market?

Answer 25

1. ICM needs to cope with the regulations been imposed by many countries on foreign investment.
2. ICM are also offered with deregulations and other opportunities in the domestic markets by these countries.

Question 26

Which is one of the largest and most remarkable international capital market ?

Answer 26

The London🇬🇧 Eurodollar.