International Economics International Economics concerns the flow of commodities, services, and productive factors (capital and labor) across national boundaries.
International Transactions Trade in commodities refers to imports and exports of merchandise; Trade in services involves such activities as shipping, insurance, travel, or tourist services performed by companies of one country for the residents of another;
International Transactions Capital flows represent: – the establishment of manufacturing plants in foreign countries; or –the acquisition of foreign bonds, stocks, and bank accounts. Labor flows describe the international migration of workers.
Why Nations Trade International trade provides us with a variety of goods and services from other countries; International trade promotes specialization and efficiency in production; and International trade provides a source of income and employment for the countries involved
Domestic Vs. International Economic Relations National boundaries have profound implications for the conduct of trade: Exchange Rates; Commercial Policy; Different Domestic Policies; Relative Immobility of Productive Factors; Statistical Data; and Marketing Considerations
Balance of Payments A set of accounts called the country’s Balance Of Payments (BOP) summarizes all the transactions by residents, firms and government of one country with their counterparts in the rest of the world
BOP Accounts: Current Account Capital Account Official Settlements Account
Current Account: Merchandise Trade Military Transactions Travel and Transportation Other Services Investment Income Unilateral Transfers
Capital Account: Long-Term Capital Account: a.Transactions in Real Assets b.Transactions in Financial Assets Short-Term Capital Account: a.Short-Term Financial Assets b.Private Credits
Official Settlements Account: Official Reserves: a.Official Gold Reserves; b.Official Foreign Exchange Holdings; c.Reserve Position in the IMF; and d.Special Drawing Rights (SDRs) Liabilities to Foreign Authorities