international economics ppt

Please also see below. this, International Economics - . T1 The U.S. as the largest debtor. Commodity X is labor intensive, and commodity Y is capital intensive in both nations; 4. Also, despite its BOP disequilibrium &Monetary and fiscal measures for the adjustment in the BO School Backgrounds for Virtual Classroom by Slidesgo.pptx. Absolute factor-price equalization It means that free international trade also equalizes the real wages for the same type of labor in the two nations and the real rate of interest for the same type of capital in the two nations. A decrease in the riskiness of U.S. investments relative to foreign DIRTY FLOAT <> In other words, it studies the economic interdependence between countries and its effects on economy. degree of economic stability by limiting the amount of exchange 2023 SlideServe | Powered By DigitalOfficePro, - - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -. Even two nations with similar production, the mutually beneficial trade is possible if the tastes or demand preferences are different. ( factor abundance and its relationship to factor prices later explanation) . CRAWLING PEG SYSTEM, THE CENTRAL BANK WILL SET UP A MAXIMUM AND (%) of U.S. National Income Source: U.S. Bureau of Economic Analysis 820-829 The changing pattern of comparative advantage in the United States and other industrial nations is examined in: B. Balassa, The Changing Pattern of Comparative Advantage in Manufactured Goods, Review of Economics and Statistics, May 1979, pp.259-266 R.D. faculty: International Economics - . Employment Argument -This arguments Practicalities. will be greatly affected by the change in the peso endobj framework wherein individuals, businesses, and banks Since PAPA, Nation 1 has a comparative advantage in commodity X and Nation 2 in commodity Y. Equilibrium-Relative Commodity Prices and Comparative Advantage Why the relative prices are different in different countries? Year 2009 versa. Exchange Controls The BSP ( Bangko Sentral ng Oia9~GMSsMRI>y{}k= }VUT} V &k|g/&L__3we=s>PWe.T2R>YP{T#'&" ~hl Z@hZ9 jW!EZDJ5. 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. The slope of an indifference curve gives the marginal rate of substitution (MRS) in consumption, or the amount of commodity Y that a nation could give up for each extra unit of commodity X and still remain on the same indifference curve. There is perfect factor mobility within each nation but no international factor mobility; 9.There are no transportation costs, tariffs, or other obstructions to the free flow of international trade; 10. In fact, the demand factor and technology change are very important to influence nations PPF. Freely sharing knowledge with learners and educators around the world. The pretrade-relative price of X is lower in Nation 1 than in Nation 2. PX/PY=1. market is the organizational currency ) to importers. 3.3 Community Indifference Curves Illustration of Community Indifference Curves The Marginal Rate of Substitution Some Difficulties with Community Indifference Curves Comments Conclusion. 2023 An Introduction to International Economics, Kenneth A. Reinert, Cambridge University Press 2012, 2021, An Introduction to International Economics. Reason: Nation 1is a L-abundant nation and commodity X is L- intensive . Quota That is H-O theorem postulates that the difference in relative factor abundance and prices is the cause of the pretrade difference in relative commodity prices between two nations. 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 With increasing costs, the incomplete specialization happens in the small nation. most valid argument for an industrializing country. <> We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program. course 17832 advanced diploma management. on the countrys foreign debt. Illustrations of the Basis for and the Gains from Trade with Increasing Costs Relative-Commodity Prices A difference in relative commodity prices between two nations is a reflection of their comparative advantage and form the basis for mutually beneficial trade. topic 1. what we will cover topic 1: International Economics - . foreign countries demand dollars to purchase these goods and services, and PPT - International Economics PowerPoint Presentation, free download - ID:3356417 International Economics. during a particular time period. the exchange rate is the number of units of one ACCORDING TO THE FOREIGN EXCHANGE Try Microsoft Office Web Apps, which allows you to open, read, and edit PowerPoint files in any Internet browser! In short, give what you at least have the most and take what you lack the Restriction assumptions about tastes, incomes and patterns of consumption to preclude intersecting community indifference curves Here the compensation principle or restrictive assumptions do not completely eliminate all the conceptual difficulties inherent in using community indifference curves. endobj demand for foreign local currency into dollars. The US current account deficit increased to 144. billion in 2004Q1 from 127billion in 2003Q4. Nation 1 gains 20X and 20Y from its no-trade equilibrium point A by exchanging 60X for 60Y with Nation 2. Both quotas and tariffs are protective measures imposed Lomugda,Ricorde. With TK/TL larger in Nation 2 than in Nation1 in the face of equal demand conditions (and technology), PK/PL will be smaller in Nation 2 , thus Nation 2 is the K-abundant nation in terms of both definitions. (Empirics, Part II), Trade Theory with Firm-Level Heterogeneity (Theory, Part I), Trade Theory with Firm-Level Heterogeneity, (cont.) chapter 1:. Organization. An Introduction to International Economics: New Perspectives on the . On the other hand, there is zero international factor mobility. Chapter 1: Introduction Chapter 1: Introduction updated figures and table Part I: International Trade Chapter 2: Absolute Advantage Chapter 3: Ricardian Model of Comparative Advantage They are sometimes imposed on specific goods and services to reduce The equivalent Figure 4.7 on p. 68 is correct. 7 0 obj that country A lacks the most. PDF, after class, for PDF version of the slides that were used in class. The terms of relative factor prices It means the rental price of capital and the price of labor time in each nation. U.S. goods and services, a huge effect on the movement of Bertil Ohlin (1899-1979) Bertil Gotthard Ohlin (pronounced [brtil ulin]) (23 April1899 3 August1979) was a Swedisheconomist and politician. lectures 7 & 8| luca rodrguez| heckscher-ohlin and the role of factor endowments. as currency devaluation/currency appraisal. / (09) 703 2953. liabilities). The basis for trade: Relative factor abundance or factor endowments as the basis for international trade or the basic cause or determinant of comparative advantage. 2 TYPES OF FIXED EXCHANGE RATE Subject matter and importance of international economics, Meeting 1 - Introduction to international economics (International Economics). (Case study 3.3 and 3.4 page from 74 to 75). Typically, countries that employ exchange controls are those with li yumei economics & management school of southwest university. Lecture slides - TeX. 3.4 Equilibrium in Isolation Illustration of Equilibrium in Isolation Equilibrium-Relative Commodity Prices and Comparative Advantage Conclusion. MINIMUM VALUE OF THE CURRENCY session 4 : trade intervention mechanism (non-tariff barriers). prof. dr. stefan kooths bits berlin (winter term 2015/2016) explain the patterns and consequences of transactions high wages at the same time. <> 7,948 course 17832 advanced diploma management. Higher curves refer to a greater level of satisfaction. labor. The summary measure the performance of the 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. Chapter Summary To introduce demand preferences or tastes (demand conditions given by community indifference curves) to extend the simple trade model (only supply conditions given by production possibility frontier) with increasing opportunity costs: To determine the equilibrium- relative commodity price in each nation in the absence of trade under increasing costs, and to indicate the commodity of comparative advantage for each nation. Production frontiers differ because of different factor endowments and /or technology in different nations. ",#(7),01444'9=82. buy more of all types of goods and services, both foreign and domestic. This is not always the case. <>/ExtGState<>/XObject<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/Annots[ 18 0 R] /MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 1. The higher real interest rate makes the U.S. bonds more attractive and September 24th October 19th, 2007. even if country A is or has a less advantage in commodities compared to cheaper foreign produced goods Canadian dollar relative to the American one is widely discussed in 18 slides Meeting 1 - Introduction to international economics (International Economics) Albina Gaisina 6.9k views 26 slides Subject matter and importance of international economics MUHAMMED SALIM AP ANAPPATTATH 1.4k views 18 slides International economic ch01 Judianto Nugroho 4.9k views 14 slides Opportunity cost theory topic 3 - exchange. Introduction. Case Study 3-1 Comparative advantage of the Unites States, the European Union and Japan Revealed Comparative Advantage () It refers to the excess in the percentage of total exports over the percentage of total imports in each major commodity group for each country or region. endobj Current Acc. An expected appreciation of the dollar. rate is the price if a unit of a exchanged for each US$1 or that US$1 will be Free delivery. 7,731 Goods and services flow across international borders. 2. So Central Banks Governments also control the supply of currency. FIGURE 3-6 Trade Based on Differences in Tastes. supply curve for dollars? The modern Factor-Endowments theory explain the reasons which leading to the different comparative advantages in different countries. Gains From Trade and the Law of Comparative Advantage (Theory) Session 1 lecture slides (PDF) 2. lecture 11 what determines exchange rates?. 20012023 Massachusetts Institute of Technology, Gains From Trade and the Law of Comparative Advantage (Theory), The Ricardian Model, (cont.) An Introduction to International Economics. They continue to be infants in spite of the exchange rates. With specialization in production and trade, each nation can consume outside its production frontier (which also represents no-trade consumption frontier). CONSTANT AGAINST ONE ANOTHER Factor Abundance Definition of Factor Abundance 1. increase depreciate International trade in goods and services An example: Sony Televisions. Balance + Capital and Financial It also means that the labor-capital ratio (L/K) is higher for commodity X than for commodity Y in both nations at the same relative factor prices. 2. (Theory, Part II), Political Economy of Trade Policy and the WTO (Empirics, Part I), Political Economy of Trade Policy and the WTO, (cont.) International trade as a fraction of the national economy has tripled for the U.S. in the past 40 years. ensure self-sufficiency in case of conflicts. CURRENCIES Increasing Returns (III) - Dumping and External Economies of Scale. Specialization continues until PX/PY is the same in both nations and trade is balanced. 11 0 obj Ocana, Cherry But this argument lost its stream when it was International economics deals with economic interactions that occur between independent nations. This occurs at the point where a community indifference curve is tangent to the nations production frontier. endobj How to determine one nations equilibrium point in isolation? the principle of comparative advantage. declines/increases due to legislation. US relative 2. standards and preservation of the environment BAYYA,SHERYLL C.Organizing and School Organization.pptx, Code of Ethics and Professional conduct for nurses.pptx, AI - MS Bing & Google Bard ChatGPT-4, Scope, functions, Qualities of nursing.pptx, AGRICULTURAL SEASONS & CROPPING PATTERN.ppt, Joshua Verr Factor Abundance Conclusion 1. Without trade, Nation 1 is at Point A with w/r=(w/r)1 and PX/PY=PA while Nation 2 is at Point A with w/r=(w/r)2 and PX/PY=PA; 4. in being poor for a long period of time. ------------------------- <> "p{14o4%ryL<9CEU+I487o92W^I3p`9yh 1c An interesting case is the Canadian-to-American (Case study 3-2 page 71). Higher indifference curves higher satisfaction Points N and A give equal satisfaction to Nation 1, since they are both on indifference curve . 2. Buy now. It is this difference in absolute commodity prices in the two nations that is the immediate cause of trade. funds of purchasing power from the Philippines to irs internal to firm (i.e. In Nation 2, A=R HE. TRY TO MAINTAIN THEIR CURRENCY VALUE predictable, more competitive and more beneficial for and quotas lecturer: 5.3 Factor Intensity, Factor Abundance, and the Shape of the, Factor Abundance and the Shape of the Production, 5.4 Factor Endowments and the Heckscher-Ohlin Theory, General Equilibrium Framework of the Heckscher-Ohlin, FIGURE 5-3 General Equilibrium Framework of the, Illustration of the Hechscher-Ohlin Theory, 5.5 Factor-Price Equalization and Income Distribution, Relative and Absolute Factor-Price Equalization. At this point the amount of one commodity that Nation 1 wants to export equals the amount of the commodity that Nation 2 wants to import. Agreements of the Philippines: In this case, Nation 2 would be considered K abundant according to the definition in physical terms and L abundant according to the definition in terms of relative factor prices. of the product they are importing. productivity. $.' 4.) The slope of production frontier gives the marginal rate of transformation. With more income, foreign They'll give your presentations a professional, memorable appearance - the kind of sophisticated look that today's audiences expect. 15 0 obj . This will set the stage of specialization in production and mutually beneficial trade, as described earlier. topic 1: international trade theory and policy. Account; or So do people. These controls allow countries a greater E.G. People will demand dollars now to Equilibrium-Relative Commodity Prices with Trade Equilibrium-relative Commodity Price with Trade It is the common relative price in both nations at which trade is balanced. Capital and Financial Account: while local industries will learn how to produce at low would increase the demand for labor. trading blocks are influenced by developed countries to secure economic independence of national self- financial assets People will supply dollars now to avoid endobj this International Economics - . 2. Case Study 5-3 (page 130) examines the pattern of revealed comparative advantage and disadvantage of various countries or regions. increase depreciate Comments Community Indifference Curves The demand factor is introduced into the simple trade model, and it makes the model more realistic. 1,627 be exchanged within the country. PowerPoint Slides for International Economics: Theory and Policy, Global Edition, 11/E. international economics i. international economics?. 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. Quotas are different than tariffs, which places a tax on imports or exports in The student is expected to: (A) explain the concepts of absolute and comparative advantages; (B) apply the concept of comparative advantage to explain why and how countries trade; and 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. 3. In other words, the relative capital price (r/w) is lower in Nation 2 than in Nation1. 16 0 obj Chapter 3 The Standard Theory of International Trade. contact, International Economics - . TO THE DISCRETION OF THE CENTRAL BANK OR SOME time period. The demand for commodities determines the derived demand for the factors required to produce them. ------------------------ (Empirics, Part II), Trade Theory with Firm-Level Heterogeneity (Theory, Part I), Trade Theory with Firm-Level Heterogeneity, (cont.) What Is International Economics About? Illustration of Trade Based on Differences in Tastes Explanation of Figure 3.6 1. 6-month access International Economics -- MyLab Economics with Pearson eText ISBN-13: 9780134636672 | Published 2017 $104.99. sufficiency. 2) Speculators -.nzx]{*[SStrwO+U[_ci4 jUpMz*$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 new trade theory. The Assumptions 1. globalization is the process of integration of an economy into the world economy. lectures 7 & 8| luca rodrguez| heckscher-ohlin and the role of factor endowments. Law of Absolute Advantage gasoline from P25 (P25 x $1) to 35 (P35 x $1). or none from others in return (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. Exercises For an exposition of the gains from trade, see: P.A. 5.1 Introduction 5.2 Assumptions of the Theory, International Economics Li Yumei Economics & Management School of Southwest University, International Economics Chapter 5 Factor Endowments and the Heckscher-Ohlin Theory, Organization 5.1 Introduction 5.2 Assumptions of the Theory 5.3 Factor Intensity, Factor Abundance, and the Shape of the Production Frontier 5.4 Factor Endowments and the Heckscher-Ohlin Theory 5.5 Factor-Price Equalization and Income Distribution 5.6 Empirical Tests of the Heckscher-Ohlin Model Chapter Summary Exercises, 5.1 Introduction Hechscher-Ohlin Trade Model To extend the trade model to identify one of the most important determinants of the difference in the pretrade-relative commodity prices and the comparative advantage among nations; To examine the effect that the international trade has on the relative price and income of the various factors of production Other more recent trade models Leontief Paradox, 5.1 Introduction Answer Two Questions The basis of comparative advantage: further explanation of the reason or cause for the difference in relative commodity prices and comparative advantage between the two nations; The effect of international trade on the earnings of factors of production in the two trading nations: to examine the effect of international trade on the earnings of labor as well as on international differences in earnings, 5.2 Assumptions of the Theory The Assumptions Meaning of the Assumptions. the university of helsinki september 22 nd october 17 th , 2008. practicalities. Li Yumei Economics & Management School of Southwest University. Nation 2 is K-abundant nation and commodity Y is the K- intensive commodity, Nation 2 can produce relatively more of commodity Y than Nation 1.This gives a production frontier for Nation 2 that is relatively flatter and wider than the production frontier of Nation 1 (if measures Y along the vertical axis). Gains form specialization: from T to E, after specialization the production point B of Nation 1 is 130 X and 20Y. The Factor-Price Equalization Theorem Explanation of H-O-S Theorem 1. Relative and Absolute Factor-Price Equalization To show the relative factor-price equalization graphically (see figure 5-5) FIGURE 5-5 Relative FactorPrice Equalization. 7,948 -1,627 588.5 3 0 obj Such as wheat land for milk production. xZ_S8LE&s!z\CHLI8pGoy2*$[vWU|y5`0:dsm0yMr=2epA1pAI3&L10Q(+C"EouDn>g84!Q_y[1DOL5>#%W} Relative and Absolute Factor-Price Equalization To summarize PX/PY will become equal as a result of trade, and this will only occur when w/r has also become equal in the two nations (as long as both nations continue to produce both commodities). imports decrease, exports will decrease also, and 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. <> and interactions between the inhabitants of different INCREASE demand, causing the U.S. dollar to appreciate: VWxdW (Less) - Illustration of Trade Based on Differences in Tastes. This implies that neither of the two nations is very small. faculty: prof. sunitha raju. <> topic 1. what we will cover topic 1: International Economics - . 2.Capital and Financial account- Gains From Trade and the Law of Comparative Advantage (Theory) Lecture 1 Notes (PDF) 2. Illustration of Increasing Costs FIGURE 3-1 Production Frontiers of Nation 1 and Nation 2 with Increasing Costs. Feenstra is a research associate of the National Bureau of Economic Research, where he directs the International Trade and Investment research program. A decrease in the value of the peso from US$1: In the absence of trade how a nation reaches its equilibrium point or point of maximum social welfare? interest rate Case study 5-1: the relative resources endowments of various countries and regions. Nation 2s production frontier is skewed toward the vertical axis, which measures commodity Y. Thus, while increasing opportunity cost in production is reflected in concave production frontiers, a declining marginal rate substitution in consumption is reflected in convex community indifference curves. For Ex. University of Helsinki. increase depreciate These are forms of protections arising from health and safety Get powerful tools for managing your contents. a)Capital account - capital transfers the exchange rate is the number of units of one. The equilibrium-relative price of X in isolation is PA=PX/PY=1/4 in Nation 1 and PA=PX/PY=4 in Nation 2. Conclusion Increasing opportunity costs meant that the nation must give up more and more of one commodity to release just enough resources to produce each additional unit of another commodity. international trade theory the standard model of trade march 1-8, 2007. the standard model of, International Economics - . The Ricardian Model, (cont.) 1.It serves as the basic link between the local and foreign exchange markets. The demand for factors of production, together with the supply of the factors, determines the price of factors of production under perfect competition. There is incomplete specialization in production in both nations; 6. The terms of physical units It means the overall amount of capital and labor available to each nation. International Economics - . Due to their different production possibility frontiers (or supply conditions) and community indifference curves (demand conditions). central bank might decide that its holdings of a particular currency

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