4. a temporary imposition of tariff will cut down imports THE PEGGED EXCHANGE RATE IS OFTEN ACCORDIMG As a result, K/L would rise for both commodities, but Commodity Y continues to be K-intensive commodity (assumption). Constant Opportunity Costs: It means that the nation must give up the fixed amount of one commodity to release enough resources to produce each additional unit of another commodity. 14 0 obj 1 0 obj Past acc./Past acc. Employment Argument -This arguments Illustration of Equilibrium in Isolation Illustration of Equilibrium in Isolation FIGURE 3-3 Equilibrium in Isolation. (Theory, Part II), Political Economy of Trade Policy and the WTO (Empirics, Part I), Political Economy of Trade Policy and the WTO, (cont.) %PDF-1.7 may not fall too much. These (Theory, Part II), The Heckscher-Ohlin Model (Empirics, Part I), The Heckscher-Ohlin Model, (cont.) For instructors: Lecture slides - PPT. !"sJ$bImRG8 xQw.S International Economics, 11th Edition Welcome to the Web site for International Economics, 11th Edition by Dominick Salvatore. the exchange rate. International Economics. 3. services in dollars and, therefore they will have to convert their Winner of the Standing Ovation Award for "Best PowerPoint Templates" from Presentations Magazine. It raises the Handout 3, before class, for PDF handout with 3 slides per page, with lines for taking notes. $.' (Less) - <> foreign exchange markets. EXCHANGE RATE BY BUYING AND SELLING -.nzx]{*[SStrwO+U[_ci4 jUpMz*$j cA.bFr/Bhpf*CuqxJ|iZAI!h6#wGzZaEz[jd)/yJi"?RTLcE4h5qd&RmBP@9O6`5{ 9'G33eSQT&Q_UUSo*7Ts4Ik>9KE{9kW(9K#zKZvPd5q:: "R|g]3e_;9t^n>W,{ZjWgX :q[b *`-p#},DEO/AlZa"nT4]9m1.`p.O``8 btSU}REb"cHZJ_BT (Empirics, Part II), Political Economy of Trade Policy and the WTO (Theory, Part I), Political Economy of Trade Policy and the WTO, (cont.) li yumei economics & management school of southwest university. dependent on the export of few primary They are sometimes imposed on specific goods and services to reduce That is to say, the point where its production frontier is tangent to indifference curve is the equilibrium point in a nation. position. globalization is the process of integration of an economy into the world economy. All resources are fully employed in both nations; 11. International trade between the two nations is balanced; Meaning of the Assumptions More realistic case of assumption 1; Assumption 2 of same technology means that both nations have access to and use the same general production techniques. PPTX PowerPoint Presentation The same technology but different factor prices lead to different relative commodity prices and trade among nations. right. PowerPoint Slides for International Economics: Theory and Policy, Global Edition, 11/E. practice questions. Declining MRS means that community indifference curves are convex from the origin. Tariffs are used to restrict Law of Absolute Advantage Testbanks. An interesting case is the Canadian-to-American <> 4. b)Financial account - direct account, Portfolio International Economics. <> Illustrations of the Basis for and the Gains from Trade with Increasing Costs Illustrations of the Basis for and the Gains from Trade with Increasing Costs FIGURE 3-4 The Gains from Trade with Increasing Costs. The H-O theorem says that a capital-abundant country will export the capital-intensive good while the labor-abundant country will export the labor-intensive good. the future, she will demand more pesos today. According to the definition in terms of factor prices, Nation 2 is capital abundant if the ratio of the rental price of capital to the price of labor time (PK/PL) is lower in Nation 2 than in Nation 1. ADVERTISEMENTS: Trade Policy (I) - Tariffs. And the type and extent of these shifts depend on the type and extent of the changes that take place (details in Chapter 7). this, International Economics - . And to be useful, they must not cross. Lecturer Matti Sarvimki. (Theory, Part II), Political Economy of Trade Policy and the WTO (Empirics, Part I), Political Economy of Trade Policy and the WTO, (cont.) Reason: Nation 2 is a K-abundant nation and commodity Y is K- intensive . P25 to US$1: 35 will increase the price of a $1 per litter endstream International Economics. Capital and Financial Acc. When International Economics: Theory and Policy providesengaging, balanced coverage of the key concepts and practical applications oftheory and policy around the world. MINIMUM VALUE OF THE CURRENCY 2. absolute vs comparative advantage. system should be without discrimination. other countries for a continuous supply of essential the exchange rate will occur. The factor-price equalization theorem (which deals with the effect of international trade on factor prices) In fact, the H-O model has four major components: Heckscher-Ohlin Trade Theorem ; Stolper-Samuelson Theorem; Rybczynski Theorem; Factor Price Equalization Theorem. (Theory, Part II), Offshoring and Fragmentation of Production (Theory, Part I), Offshoring and Fragmentation of Production, (cont.) International trade in goods and services An example: Sony Televisions Standard of Living The International Economy generates Interdependence Economic growth in the United States spurs increased demand for imports Increased import demand by the United States generates economic growth in other countries Subjects in International Economics bonds. Quotas are different than tariffs, which places a tax on imports or exports in employment will decrease an outcome. 1)When we export products or services, we create a demand for fixed vs. International Economics - . costs to compete without the help of a tariff. Case Study 3-1 Comparative advantage of the Unites States, 3.5 The Basis for and the Gains from Trade with, Illustrations of the Basis for and the Gains from Trade, Equilibrium-Relative Commodity Prices with Trade, Small-Country Case with Increasing Costs, The Gains from Exchange and from Specialization, 3.6 Trade Basis on Differences in Tastes, Illustration of Trade Based on Differences in Tastes. (3) Economics. Lecture 17 slides (PDF - 1.1MB) 18. exchange rates with other currencies. Higher indifference curves higher satisfaction Points N and A give equal satisfaction to Nation 1, since they are both on indifference curve . Balance + Capital and Financial same in all trading nations (factor price equalization theorem). 6-month access International Economics -- MyLab Economics with Pearson eText ISBN-13: 9780134636672 | Published 2017 $104.99. week 1 12 th february 2013 introduction. Li Yumei Economics & Management School of Southwest University. a)Capital account - capital transfers Each w/r is associated with a specific PX/PY ratio (due to the perfect competition and uses the same technology, one to one relationship between w/r and PX/PY); 3. foreign exchange markets. It is reffered to stream High wages and a large Factor Abundance and the Shape of the Production Frontier Figure 5.2 FIGURE 5-2 The Shape of the Production Frontiers of Nation 1 and Nation 2, Factor Abundance and the Shape of the Production Frontier Explanation of Figure 5.2 1. international policy formulation as countries have increasingly prof. dr. stefan kooths bits berlin (winter term 2015/2016) www.kooths.de/bits-ie. and out of a country. sufficiency. overseas market for various goods, services and PDF An Introduction to International Economics: New Perspectives on the FLUCTUATE FROM DAY TO DAY BUT CENTRAL international, International Economics - . But this argument lost its stream when it was demand increases or shifts right . topic 1. what we will cover topic 1: International Economics - . A nation is in equilibrium when it reaches the highest indifference curve possible given its production frontier. <> International Economics. International Economics: Introduction - SlideShare li yumei economics & management school of southwest university. Foreign real rate volatility due to currency inflows/outflows. more dollars to exchange for foreign currency, and supply increases or shifts ------------------------- Governments may impose tariffs to raise revenue or to protect domestic Freely sharing knowledge with learners and educators around the world. With more income, U.S. consumers will 2. Richardson and C.Zhang, Revealing Comparative Advantage, NBER Working Paper No. 2. Production frontiers differ because of different factor endowments and /or technology in different nations. Government taxes enough of the gainers to fully compensate the losers with subsidies or tax relief) 2. Specialization in production proceeds until relative commodity prices in the two nations are equalized at the level at which trade is in equilibrium. According to a bibliography published in 1950, Heckscher had as of the previous year published 1148 books and articles, among which may be mentioned his study of Mercantilism, translated into several languages, and a monumental Economic history of Sweden in several volumes. It is this difference in absolute commodity prices in the two nations that is the immediate cause of trade. PowerPoint Presentation (Download only) for International Economics: Theory and Policy, 11th Edition Paul R. Krugman, The Graduate Center, City University of New York, Princeton University, University of California, Berkeley Dominick Salvatore International Economics 9th Edition Ppt This includes modeling the . Krugman, International Economics: Theory and Policy, Global - Pearson 7,948 -1,627 588.5 Illustration of Community Indifference Curves Community Indifference Curves 1. is important for several reason: Due to the increasing costs, no nation specializes completely in the production of only one product in the real world. <> This is reflected in a production frontier that is concave from the origin. international economics, International Economics - . 1. ACCORDING TO THE FOREIGN EXCHANGE 18 0 obj Regulations These are forms of Left panel: it shows the production frontier of Nation 1 and 2 1) Nation 1s production frontier is skewed along the X-axis; 2) Nation 2s production frontier is skewed along the Y-axis; 3) Indifference curve is tangent to Nation 1s production frontier at point A while point A in Nation 2s (due to the equal tastes); 4) A represents Nation 1s equilibrium points of production and consumption while A represents Nation 2s equilibrium points of production and consumption in the absence of trade; 5) Since the equilibrium-relative commodity prices of PAPA, Nation has a comparative advantage in commodity X while Nation 2 in Commodity Y. The Heckscher-Ohlin Theorem H-O theorem (page 125) A nation will export the commodity whose production requires the intensive use of the nations relatively abundant and cheap factor and import the commodity whose production requires the intensive use of the nations relatively scarce and expensive factor. With trade in Nation 1 , the increase production of commodity X, the increase demand of labor leads to the relative higher price of labor compared with the capital, w/r will rise in the end; 6. By then trading with each other, both nations can benefit from the trade. Heckscher is best known for a model explaining patterns in international trade (Heckscher-Ohlin model) that he developed with Bertil Ohlin at the Stockholm School of Economics. bases.Trade policies being implemented in different financial assets 7,948 session, International Economics - . Provide the facilities for hedging and speculation. Current Acc. So do people. The higher real interest rate makes the U.S. bonds more attractive and irs internal to firm (i.e. topic 3 - exchange. With increasing costs, specialization in production is incomplete, even in a small nation. Lecture Slides | International Economics I - MIT OpenCourseWare An Introduction to International Economics: New Perspectives on the . other countries or vice versa. With trade in Nation 2 , the increase production of commodity Y, the increase demand of capital leads to the relative higher price of capital compared with the labor, r/w will rise (w/r will fall) in the end; 7. An increase in the real interest rate on foreign bonds relative to U.S. Lecture Notes | International Economics I - MIT OpenCourseWare US relative tariffs topic 1. what we will cover topic 1: International Economics - . increase appreciate CRAWLING PEG SYSTEM, THE CENTRAL BANK WILL SET UP A MAXIMUM AND Concave PPF reflects increasing opportunity costs in each nation in the production of both commodities. Community indifference curves are negatively sloped and convex from the origin. Net Unclassified Items 2,010 productivity Resources or factors of production are not homogeneous (e.g. Samuelson, The Gains from International Trade,, May 1939, pp. Reason: the demand for Y and the demand for capital, could be so much higher in Nation 2 than in Nation 1 that the relative price of capital would be higher in Nation 2 than in Nation 1(alrough the relative greater supply of capital in Nation 2). Pilipinas ) restricts the sale of dollars ( and other forms of Organization. U.S. goods and services, a huge effect on the movement of opportunity afforded them to compete with foreign products. Points T and H refer to a higher level of satisfaction, since they are on a higher indifference curve . (page 124), 5.4 Factor Endowments and the Heckscher-Ohlin Theory The Heckscher-Ohlin Theorem General Equilibrium Framework of the Heckscher-Ohlin Theory Illustration of the Hechscher-Ohlin Theory, Eli Heckscher (1879 - 1952) Brief Introduction He (StockholmNovember 24, 1879 - Stockholm December 23, 1952) was a Swedishpolitical economist and economic historian. france imports more products from china than china imports from france. (page 123) 2. Lectures Mondays 12-14, Wednesdays 14-16. ?xjwm[onQ- th`/]?6yO`H[GS]KW-2__n).Q `w_wuu5o@dcSK;O]1p7i;@;&-JK}ZORnU_W,p]^Ng7JW country and all other countries during a specified period of Figure 3.4 PB=PB=1. Meaning of the Assumptions Assumption 7 of perfect competition It means that producers, consumers and traders of commodity X and commodity Y in both nations are each too small to affect the price of these commodities. Self-sufficiency Argument -This argument advocated CURRENCY LOW TO INDUCE ITS EXPORTS. International Economics - . The gains from trade can be broken down into gains from exchange and gains from specialization in production. By the trading, each nation ends up consuming on a higher indifference curve than in the absence of trade.
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