International economics part 2
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International Economics Part 2. Dr. Stefan Kooths BiTS Berlin (winter term 2013/2014) www.kooths.de/bits-ie. Outline. Introduction and Overview Systemizing and Recording Cross-border Economic Activity The Pure Theory of International Trade General analysis of cross-border trade

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International Economics Part 2

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International economics part 2

International EconomicsPart 2

Dr. Stefan Kooths

BiTS Berlin(winter term 2013/2014)

www.kooths.de/bits-ie


Outline

Outline

  • Introduction and Overview

  • Systemizing and Recording Cross-border Economic Activity

  • The Pure Theory of International Trade

    • General analysis of cross-border trade

    • Reasons for inter-industry trade:Absolute and comparative advantage

    • Causes and consequences of cost differences:The role of factor endowments and factor proportions

    • “Imperfect” competition and intra-industry trade

  • Trade Policy: Free Trade vs. Protectionism

  • Foreign Exchange Markets and the Open Macroeconomy

  • Case Study: The Euro Area Crisis

  • Summary: The Key Lessons Learnt


Four basic questions about trade trigger impact national and international gains

Four basic questions about trade:Trigger, impact, national and international gains


Categories of trade

Categories of trade

  • Non-availability (trade in commodities)

  • Inter-industry trade (specialization)

  • Intra-industry trade


Product markets general assumptions demand and supply consumer and producer surplus elasticities

Product markets: General assumptions, demand and supply, consumer and producer surplus, elasticities


Opening of trade national and international markets

Opening of trade: National and international markets


Arbitrage and free trade equilibrium

Arbitrage and free-trade equilibrium


Terms of trade

Terms of trade


Four basic answers to trade

Four basic answers to trade


Outline1

Outline

  • Introduction and Overview

  • Systemizing and Recording Cross-border Economic Activity

  • The Pure Theory of International Trade

    • General analysis of cross-border trade

    • Reasons for inter-industry trade:Absolute and comparative advantage

    • Causes and consequences of cost differences:The role of factor endowments and factor proportions

    • “Imperfect” competition and intra-industry trade

  • Trade Policy: Free Trade vs. Protectionism

  • Foreign Exchange Markets and the Open Macroeconomy

  • Case Study: The Euro Area Crisis

  • Summary: The Key Lessons Learnt


Adam smith theory of absolute advantage

Adam Smith: Theory of absolute advantage

  • Maximum number of working hours: 10 (millions, billions, …)

  • Production and consumption possibilities without trade(self-sufficiency)?

  • Consumption possibilities with trade and specialization(division of labor)?

Adam Smith (1723—1790)

An Inquiry into the Nature and Causesof the Wealth of Nations, 1776


David ricardo opportunity cost and theorem of comparative advantage

David Ricardo:Opportunity cost and theorem of comparative advantage

  • Maximum number of working hours: 10 (millions, billions, …)

  • Production and consumption possibilities without trade(self-sufficiency)?

  • Any chance for mutually beneficial trade (division of labor)?

David Ricardo (1772—1823)

On the Principles of Political Economy and Taxation, 1817


Production possibility curve

Production-possibility curve


Exchange rate and terms of trade

Exchange rate and terms of trade


Mercantilism and unbalanced trade

Mercantilism and unbalanced trade


Complete vs incomplete specialization constant vs increasing marginal cost

Complete vs. incomplete specialization: Constant vs. increasing marginal cost


Production conditions preferences and trade patterns

Production conditions, preferences and trade patterns


Trade effects and gains from trade

Trade effects and gains from trade


Country size and relative international winners

Country size and relative international winners


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