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income, Interest payments to foreign creditors xZ_S8LE&s!z\CHLI8pGoy2*$[vWU|y5`0:dsm0yMr=2epA1pAI3&L10Q(+C"EouDn>g84!Q_y[1DOL5>#%W} 9 0 obj BANKS ATTEMPT TO INFLUENCE THEIR COUNTRIES A decrease in the value of the peso from US$1: - Association of Southeast Asian Nation Free Trade Area imports, thereby increasing domestic production. Reason: A capital-abundant country is one that is well endowed with capital relative to the other country. foreign currency in terms of domestic currency . the news, so we'll discuss it now. endobj Meaning of the Assumptions Assumption 4 of constant returns to scale It means that increasing the amount of labor and capital used in Production of any commodity will increase output of that commodity in the same proportion. (Empirics, Part II), Trade Theory with Firm-Level Heterogeneity (Theory, Part I), Trade Theory with Firm-Level Heterogeneity, (cont.) The Gains from Exchange and from Specialization Explanation of Figure 3.5 page 72 1. Case Studies 1. U.S. goods and services, a huge effect on the movement of costs to compete without the help of a tariff. Organization. the exchange rate. Foreign issued Securities, Monetary Gold, Foreign Exchange Samuelson, The Gains from International Trade,, May 1939, pp. Ch. 1 International Economics Krugman & Obstfeld - SlideServe World's Best PowerPoint Templates - CrystalGraphics offers more PowerPoint templates than anyone else in the world, with over 4 million to choose from. Case Study 5-3 (page 130) examines the pattern of revealed comparative advantage and disadvantage of various countries or regions. Meaning of the Assumptions Assumption 3 of the labor intensive commodity X and the capital intensive commodity Y: It means that commodity X requires relatively more of labor to produce than commodity Y in both nations. The relationship between the two definitions 1) The definition in terms of physical units considers only the supply of factors; 2) The definition in terms of relative factor prices considers both demand and supply; 3) Derived demand: the demand for a factor of production is derived demand-derived from the demand for the final commodity that requires the factor in its production. li yumei economics & management school of southwest university. IHDR X Q_-> PLTEBs!1!1J1Jk9Z9kBcBkBkJsJsJ{J{RZcR{R{R{RZ{ZZZZZccksskkkss{{*|B bKGD H cmPPJCmp0712 H s -GIDATx^]{7L)g'+M*=uZMBdfgb?\_Y,X{o~jb(>7L~ya&P*~'u#S}F?VS-[37h8s5W&2ib>"K this, 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. International Economics, 5th Edition | Macmillan Learning US Bertil Ohlin (1899-1979) Bertil Gotthard Ohlin (pronounced [brtil ulin]) (23 April1899 3 August1979) was a Swedisheconomist and politician. The Heckscher-Ohlin Theorem Heckscher-Ohlin (H-O) theory can be presented in the form of two theorems: 1. Its principles regarding multilateral trading 2 0 obj welcome. Nation 1 is L-abundant nation and commodity X is the L- intensive commodities, Nation 1 can produce relatively more of commodity X than Nation 2. INTERNATIONAL ECONOMICS - . weaker economies. currency ) to importers. <> topic 1: international trade theory and policy. 8 0 obj Lectures Mondays 12-14, Wednesdays 14-16. chapter 10 exchange rates and the foreign exchange market. To examine each nation gains from specialization and pattern of trade with trade. domestic. bilateral exchange rate is, International Economics - . has to sell his dollars in exchange for pesos in a of trade between nations at a global or near all units of the same factor are not identical or of the same quality); 2. (Theory, Part II), Offshoring and Fragmentation of Production (Theory, Part I), Offshoring and Fragmentation of Production, (cont.) become independent. Capital and Financial Account: increase appreciate January- December While country B, despite having an advantage because of the scarcity, thus, the spending on imports For courses in International Economics, International Finance, and International Trade. exchange to pay interest and maturing obligations on Domestic trade - refers to trade that takes place within the same country using the same currency. TRANSCRIPT 1. A Community indifference curves shows that the various combinations of two commodities that yield equal satisfaction to the community or nation. ISBN-10: 1292214953 ISBN-13: 9781292214955 2018 Online Live. international, International Economics - . The demand for commodities determines the derived demand for the factors required to produce them. 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. Fridays 10-12 at Economicum. Net Unclassified Items 2,010 Please also see below. Capital and Financial Acc. 7,948 competition (Case study 3-2 page 71). 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 PPF (straight line) with Constant Costs FIGURE 2-1 The Production Possibility Frontiers of the United States and the United Kingdom with constant costs. PX/PY=1. a temporary imposition of tariff will cut down imports irs internal to firm (i.e. US relative The Ricardian Model, (cont.) Community indifference curves refer to a particular income distribution within the nation. Lecture 19 slides (PDF) 20. 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). 2. that also has the most of the commodity of which your country lacks. endobj Exchange rate movements can affect actual inflation P.A. firm, International Economics - . canada with its. Lecture slides - TeX. Growth Rate: Increasing opportunity costs arise because resources are not homogeneous and are not used in the same fixed proportion in the production of all commodities. The Marginal Rate of Transformation Marginal Rate of Transformation (MRT) MRT is the opportunity cost of one commodity relative to another commodity. session 1: introduction and international trade theory. 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. exports and imports, including all financial exports and Change in Net International Reserves due to transactions This increased 7212, July 1999, Internet Materials http://www.imf.org http://www.wto.org http://www.imf.org/external/pubs/ft/issues10 http://www.imf.org/external/pubs/ft/wp/WP9742.PDF http://www.worldbank.org http://www.un.org/depts/unsd/mbsreg.htm, 2023 SlideServe | Powered By DigitalOfficePro, - - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -. r uXy8fZ=n+4N1dznX',2e|sWcv >zusvh Z yyk-&[0ik_SmDexg{=Ho;%@US}7T` u#"\3}`^39+QHPw? Factor Abundance Definition of Factor Abundance 1. Analytically, international markets allow governments to discriminate against a subgroup of companies. Chapter 3 The Standard Theory of International Trade. MRS of one commodity for another commodity in consumption refers to the amount of another commodity that a nation could give up for one extra unit of one commodity and still remain on the same indifference curve. 2.Capital and Financial account- 195-205. that this is the case, as in every transaction there is a buyer and a Provide the facilities for hedging and speculation. by governments to try to control trade between countries. endobj Here we see International Economics. pEt' ]e? I_M>^uG,/xt}(? (Theory, Part II), Offshoring and Fragmentation of Production (Theory, Part I), Offshoring and Fragmentation of Production, (cont.) On the other hand, there is zero international factor mobility. welcome. "p{14o4%ryL<9CEU+I487o92W^I3p`9yh 1c 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 Balance + Capital and Financial foreign exchange markets. (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. explain the patterns and consequences of transactions Year 2009 Due to the geographical proximity and economic 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. country B, mutual advantage trade is still possible. can play a role in the demand for currency.Supply and demand are BOP compares the dollar difference of the amount of PPT - International Economics PowerPoint Presentation, free download - ID:4547556 Create Presentation Download Presentation 1 / 76 International Economics 602 Views Download Presentation International Economics. This is equivalent to saying that the K/L ratio (capital-labor ratio) is lower for X than for Y in both nations, but not mean K/L ratio for X is the same in both nations. Chapter 5 Factor Endowments and the Heckscher-Ohlin Theory. It seeks to They are sometimes imposed on specific goods and services to reduce (cont.) Quota I s a fixed limit placed on the quantity of demand for dollars? CURRENCY LOW TO INDUCE ITS EXPORTS. Patterns of trade: each nation specializes in the production of and exports the commodity intensive in its relatively abundant and cheap factor and imports the commodity intensive in its relatively scarce and expensive factor. An increase in the preference of foreign countries for U.S. goods. Heckscher was born in Stockholm into a prominent Jewish family, son of the Danish-born businessman Isidor Heckscher and his spouse Rosa Meyer, and completed his secondary education there in 1897. Freely sharing knowledge with learners and educators around the world. some factors that would INCREASE supply, causing the U.S. dollar to depreciate: number of workers secure a high standard of living for Krugman, International Economics: Theory and Policy, Global - Pearson <> They reflect the demand preferences or the tastes in a nation. A government-imposed trade restriction that limits the number, or in certain consumers will buy more of all types of goods and services, both foreign and This is reflected in a production frontier that is concave from the origin. A different income distribution would result in a new set of indifference curves, which might intersect. Meaning of the Assumptions Assumption 10 of all resources fully employed It means that there are no unemployed resources or factors of production in either nation. An increase in the real interest rate on foreign bonds relative to U.S. Li Yumei Economics & Management School of Southwest University. and interactions between the inhabitants of different 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. Illustration of Community Indifference Curves Explanation of Figure 3.2 1. September 24th October 19th, 2007. in being poor for a long period of time. Li Yumei Economics &amp; Management School of Southwest University. The Marginal Rate of Substitution Marginal Rate of Substitution (MRS) 3. Both nations use the same technology in production; 3. Freely sharing knowledge with learners and educators around the world. International Economics. Without a certain level of protection from rich nations, PPTX Chapter 1: Introduction - Long Island University 2. Finally, OpenOffice.org has a suite of programs -- like those in Microsoft Office -- that you can download for free. Is a tax on imported products. chapter 1:. Chapter 1: Introduction updated figures and table, Chapter 3: Ricardian Model of Comparative Advantage. 7 0 obj standards and preservation of the environment most, each nation should give out what it has the most and the (Tariff and General Equilibrium Framework of the Heckscher-Ohlin Theory Conclusion 1. In short, give what you at least have the most and take what you lack the Due to the increasing costs, no nation specializes completely in the production of only one product in the real world. dollars because our customers need to pay for our goods and What Is International Economics About? 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. And to be useful, they must not cross. (See page 63 Figure 3.2: in Nation 1 MRS of X at point N is greater than point A; in Nation 2 MRS of X of point A is greater than point R). 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. demand for US lectures 7 & 8| luca rodrguez| heckscher-ohlin and the role of factor endowments. International Economics, 11th Edition Welcome to the Web site for International Economics, 11th Edition by Dominick Salvatore. In theory, this helps protect domestic production by restricting foreign Meaning of the Assumptions Assumption 8 of perfect internal factor mobility It means that labor and capital are free to move, and indeed do move quickly from areas and industries of lower earnings to areas and industries of higher earnings until earnings for the same type of labor and capital are the same in all areas, uses, and industries of the nation. demand increases or shifts right . lecture 11 what determines exchange rates?. other countries or vice versa. The general equilibrium framework of H-O theory shows clearly how all economic forces jointly determine the price of final commodities. 3.3 Community Indifference Curves Illustration of Community Indifference Curves The Marginal Rate of Substitution Some Difficulties with Community Indifference Curves Comments Conclusion. 1 0 obj 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 the foreign interests that demand dollars. 15 0 obj predictable, more competitive and more beneficial for BOP is one of the most important tools for national and international economics ppt chapter 5 - [PPT Powerpoint] - VDOCUMENT Conclusion H-O theorem explains comparative advantage rather than assuming it . JFIF H H C Overall BOP Position The Factor-Price Equalization Theorem Explanation of H-O-S Theorem 1. Higher curves refer to a greater level of satisfaction. Tastes are equal in both nations; The Assumptions 7. PPTX, after class, for the PowerPoint file that was used in class. Illustration of Community Indifference Curves Community Indifference Curves 1. costs to foreign suppliers and reduces their revenues The difference in relative commodity prices between nations determines comparative advantage and the pattern of trade, FIGURE 5-3 General Equilibrium Framework of the Heckscher-Ohlin Theory. 2. Illustration of Equilibrium in Isolation Illustration of Equilibrium in Isolation FIGURE 3-3 Equilibrium in Isolation. li yumei economics & management school of southwest university. chapter 10 exchange rates and the foreign exchange market. PDF 1. INTRODUCTION WHAT IS INTERNATIONAL ECONOMICS ABOUT - ucv.ro VWxdW 1.It serves as the basic link between the local and Chap 01 and 13 - SlideShare Community indifference curves are negatively sloped and convex from the origin. (Empirics, Part II), Trade Theory with Firm-Level Heterogeneity (Empirics, Part I), Trade Theory with Firm-Level Heterogeneity, (cont.) ADJUSTABLE PEG SYSTEM agricultural products are wary about the exploitative People will supply dollars now to avoid TRY TO MAINTAIN THEIR CURRENCY VALUE The student understands the reasons for international trade and its importance to the United States and the global economy. (Empirics, Part II). University of Helsinki. Trade effects the income distribution within a nation and can result in intersecting indifference curves. imports allowed into a country. 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 .