Dale R. DeBoer University of Colorado, Colorado Springs An Introduction to International Economics Chapter 1: Introduction Dominick Salvatore John Wiley & Sons, Inc.

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services –An example: Sony Televisions

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services –A key issue – its not just imports! Exports of Boeing Aircraft Exports of Microsoft Software

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services –A key issue – its not just imports! –Its also not just for consumers! Trade in component parts Monitors for Dell Computers

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services –A key issue – its not just imports! –Its also not just for consumers! –Services, not just goods! Lloyd’s of London

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services –A key issue – its not just imports! –Its also not just for consumers! –Services, not just goods! –International trade is expanding

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services –A key issue – its not just imports! –Its also not just for consumers! –Services, not just goods! –International trade is expanding Source: World Trade Organization

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services International ownership of assets –Examples Foreign stock ownership Automobile assembly plants –Toyota WWW linkToyota WWW link US government debt

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services International ownership of assets Currency exchange –International transactions require conversions between currencies –Foreign exchange markets Federal Reserve Bank Exchange Rate Data WWW link

Dale R. DeBoer University of Colorado, Colorado Springs What is International Economics? International trade in goods and services International ownership of assets Currency exchange International organizations –World Trade Organization WWW link –International Monetary Fund WWW link –European Union WWW link

Dale R. DeBoer University of Colorado, Colorado Springs 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

Dale R. DeBoer University of Colorado, Colorado Springs Standard of Living The International Economy generates Interdependence Sources of potential gain –Access to items not available domestically Coffee Bananas Tin Tungsten

Dale R. DeBoer University of Colorado, Colorado Springs Standard of Living The International Economy generates Interdependence Sources of potential gain –Access to items not available domestically –Access to lower cost products –Access to greater product variety

Dale R. DeBoer University of Colorado, Colorado Springs Standard of Living The International Economy generates Interdependence Sources of potential gain Is it always a gain? –Import competing sectors may experience production and job losses –This loss is at least partially (and potentially, completely) offset by gains in the exporting sectors

Dale R. DeBoer University of Colorado, Colorado Springs Subjects in International Economics International Trade Theory –Analyzes the basis of and the gains from international trade –Focuses on the microeconomic aspects of the international economy

Dale R. DeBoer University of Colorado, Colorado Springs Subjects in International Economics International Trade Theory International Trade Policy –Examines the reasons for and the effects of restrictions on international trade –Analyzes the implications for International Trade Theory of such restrictions

Dale R. DeBoer University of Colorado, Colorado Springs Subjects in International Economics International Trade Theory International Trade Policy Balance of Payments –A summary statement of all the international transactions of the residents of a nation with the rest of the world during a particular period of time, usually a year. –Provides a statistical summary of the size of international trade and international asset ownership for a country

Dale R. DeBoer University of Colorado, Colorado Springs Subjects in International Economics International Trade Theory International Trade Policy Balance of Payments Foreign Exchange Markets –The institutional framework for the exchange of one national currency into another –Part of the study of International Finance (or Open-Economy Macroeconomics) that is concerned with the macroeconomic implications of the International Economy

Dale R. DeBoer University of Colorado, Colorado Springs Subjects in International Economics International Trade Theory International Trade Policy Balance of Payments Foreign Exchange Markets Adjustments in the Balance of Payments –Focuses on the relationship between internal and external aspects of the economy –Examines how disequilibria lead to macroeconomic adjustment under difference international monetary systems

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Trade Protectionism in Industrial Countries –What are the reasons for this protection? –What are the implications of this protection for the industrial countries? –What are the implications of this protection for the rest of the world? –How do regional trade blocks (the NAFTA, the European Union, etc.) complicate efforts to reduce this protection?

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Trade Protectionism in Industrial Countries Excessive Fluctuations and Large Disequilibria in Exchange Rates –Large exchange rate fluctuations may disrupt international trade and harm economic growth –What is the source of these fluctuations? –How can the international financial system be reformed to eliminate these fluctuations?

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Trade Protectionism in Industrial Countries Excessive Fluctuations and Large Disequilibria in Exchange Rates Financial Crises in Emerging Market Economies –The causes and consequences of a sudden collapse in the value of a currency of an emerging economy

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Trade Protectionism in Industrial Countries Excessive Fluctuations and Large Disequilibria in Exchange Rates Financial Crises in Emerging Market Economies High Structural Unemployment and Slow Growth in Europe and Stagnation in Japan

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Trade Protectionism in Industrial Countries Excessive Fluctuations and Large Disequilibria in Exchange Rates Financial Crises in Emerging Market Economies High Structural Unemployment and Slow Growth in Europe and Stagnation in Japan Job Insecurity from Restructuring and Downsizing in the United States

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Excessive Fluctuations and Large Disequilibria in Exchange Rates Financial Crises in Emerging Market Economies High Structural Unemployment and Slow Growth in Europe and Stagnation in Japan Job Insecurity from Restructuring and Downsizing in the United States Restructuring Problems of Transition Economies

Dale R. DeBoer University of Colorado, Colorado Springs Current International Economic Problems Excessive Fluctuations and Large Disequilibria in Exchange Rates Financial Crises in Emerging Market Economies High Structural Unemployment and Slow Growth in Europe and Stagnation in Japan Job Insecurity from Restructuring and Downsizing in the United States Restructuring Problems of Transition Economies Deep Poverty in Many Developing Countries

Dale R. DeBoer University of Colorado, Colorado Springs Globalization What is globalization? –Increasing international economic connections International Trade International Asset Ownership

Dale R. DeBoer University of Colorado, Colorado Springs Globalization What is globalization? –Increasing international economic connections –Increasing role of International Organizations in constraining domestic policies

Dale R. DeBoer University of Colorado, Colorado Springs Globalization What is globalization? –Increasing international economic connections –Increasing role of International Organizations in constraining domestic policies –Increasing cultural homogeneity

Dale R. DeBoer University of Colorado, Colorado Springs Globalization What is globalization? –Increasing international economic connections –Increasing role of International Organizations in constraining domestic policies –Increasing cultural homogeneity –Increased domestic economic growth caused by expanded international connections Potential harm? –Environmental concerns

Dale R. DeBoer University of Colorado, Colorado Springs Globalization What is globalization? The Anti-Globalization movement –A loose coalition of groups opposed to globalization –Concerns Environmental damage Loss of domestic labor protections Erosion of domestic sovereignty

Dale R. DeBoer University of Colorado, Colorado Springs Organization of the Text Part One: Chapters 2-4 –International Trade Theory

Dale R. DeBoer University of Colorado, Colorado Springs Organization of the Text Part One: Chapters 2-4 Part Two: Chapters 5-6 –International Trade Policies

Dale R. DeBoer University of Colorado, Colorado Springs Organization of the Text Part One: Chapters 2-4 Part Two: Chapters 5-6 Part Three: Chapters 7-9 –International Asset Ownership

Dale R. DeBoer University of Colorado, Colorado Springs Organization of the Text Part One: Chapters 2-4 Part Two: Chapters 5-6 Part Three: Chapters 7-9 Part Four: Chapters –Balance of Payments and Exchange Rate Markets

Dale R. DeBoer University of Colorado, Colorado Springs Organization of the Text Part One: Chapters 2-4 Part Two: Chapters 5-6 Part Three: Chapters 7-9 Part Four: Chapters Part Five: Chapters –Open-Economy Macroeconomics

Dale R. DeBoer University of Colorado, Colorado Springs Organization of the Text Part One: Chapters 2-4 Part Two: Chapters 5-6 Part Three: Chapters 7-9 Part Four: Chapters Part Five: Chapters Part Six: Chapters –The International Economy in Operation