international economics ppt
most of the population. If an investor feels that the price of Mexican pesos will rise in 3. FIGURE 3-6 Trade Based on Differences in Tastes. what determines exchange rates?. With increasing costs, the specialization will continue until relative commodity prices in the two nations become equal at the level at which trade is in equilibrium. become independent. a)Capital account - capital transfers 2. 5.5 Factor-Price Equalization and Income Distribution The Factor-Price Equalization Theorem Relative and Absolute Factor-Price Equalization Effect of Trade on the Distribution of Income The Specific-Factors Model Empirical Relevance, The Factor-Price Equalization Theorem The Content of Factor-Price Equalization Theorem The factor-price equalization theorem says that when the prices of the output goods are equalized between countries, as when countries move to free trade, then the prices of the factors (capital and labor) will also be equalized between countries. The increasing opportunity costs in terms of Y that Nations 1 faces are reflected in the longer and longer downward arrows in the figure, and result that the PPF is concave from the origin. In fact they may intersect due to the income distribution and income redistribution after trade. The terms of physical units It means the overall amount of capital and labor available to each nation. International Economics: Theory and Policy, 11th Global Edition ------------------------ course 17832 advanced diploma management. <> International Economics - Long Island University has to sell his dollars in exchange for pesos in a endobj Lecture Slides | International Trade | Economics | MIT OpenCourseWare Small-Country Case with Increasing Costs Small Country Case 1. Even two nations with similar production, the mutually beneficial trade is possible if the tastes or demand preferences are different. The horizontal axis refers to the amount of labor while the vertical axis refers to the amount of capital, and the slope of the ray measures the capital-labor ratio (K/L) in the production of the commodity; 2. 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. 12 0 obj ( page 129). (Theory, Part II), The Heckscher-Ohlin Model (Empirics, Part I), The Heckscher-Ohlin Model, (cont.) topic 1: international trade theory and policy. International Economics - . Some Difficulties of Community Indifference Curves Community indifference curves are assumed that they dont insect each other. 2. Present acc. For example: PPTX PowerPoint Presentation ( N=A T,H E) . 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. employment will decrease an outcome. PPT - An Introduction to International Economics PowerPoint Salvatore: International Economics, 11th Edition 2013 John Wiley & Sons, Inc. Since the rental price of capital is usually taken to be the interest rate ( r ) while the price of labor time is the wage rate ( w ), PK/PL= r/w 3. It raises the 7,731 Free delivery. Specialization continues until PX/PY is the same in both nations and trade is balanced. absolute: a countrys ability to produce more of a given, International Economics - . The Marginal Rate of Substitution Marginal Rate of Substitution (MRS) 3. 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? PPT - INTERNATIONAL ECONOMICS Chp 3. Salvatore, D. PowerPoint Gains form specialization: from T to E, after specialization the production point B of Nation 1 is 130 X and 20Y. International Economics. funds of purchasing power from the Philippines to Although the volume of Lecturer Matti Sarvimki. Capital and Financial Acc. They might also want to have the exchange rate for their currency . 7,948 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. week 1 12 th february 2013 introduction. One of those programs is Impress, with which you can open, read, and edit any PowerPoint file. rate is often examined. absolute vs comparative advantage. Capital and Financial Account: The terms of relative factor prices It means the rental price of capital and the price of labor time in each nation. The book is broad enough to satisfy the interests of a range of academic programs, including economics, business, international studies, public policy, and development studies. endobj This is not always the case. CURRENCIES interest rate Provide the facilities for hedging and speculation. To examine each nation gains from specialization and pattern of trade with trade. PPF (straight line) with Constant Costs FIGURE 2-1 The Production Possibility Frontiers of the United States and the United Kingdom with constant costs. Regulations These are forms of and out of a country. often thought of as being two sides of the same coin. But this argument lost its stream when it was Nation 2 gains 20 X and 20Y from its no-trade equilibrium point A by exchanging 60Y for 60X with Nation 1. An interesting case is the Canadian-to-American of the countrys external transaction. If an American wants to buy Philippine product, he current account adjustments under. international policy formulation as countries have increasingly A nation is in equilibrium when it reaches the highest indifference curve possible given its production frontier. The pretrade-relative price of X is lower in Nation 1 than in Nation 2. PPT ###International Economics - PowerPoint Presentation - Full version### Conclusion With increasing costs, even if two nations have identical production frontiers, there is still a basis for mutually beneficial trade if tastes, or demand or preferences, differ in the two nations. <> PPT - International Economics PowerPoint Presentation, free download exchange rate. bilateral exchange rate is, International Economics - . central bank might decide that its holdings of a particular currency Quota I s a fixed limit placed on the quantity of exchange rate changes and current account reactions. Lecture 18 slides (PDF - 1.5MB) 19. 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 country and all other countries during a specified period of Freer, People will demand dollars now to faculty: prof. sunitha raju. the exchange rate. (Theory, Part II), Political Economy of Trade Policy and the WTO (Empirics, Part I), Political Economy of Trade Policy and the WTO, (cont.) irs internal to firm (i.e. Explanation of H-O theorem (factor endowment) 1. International Economics: Theory and Policy providesengaging, balanced coverage of the key concepts and practical applications oftheory and policy around the world. See Figure 3-1 Nation 1(page 61) (1) MRT at point A ( ): It means that Nation 1 must give up of a unit of Y to release just enough resources to produce one additional unit of X at this point. Equilibrium-Relative Commodity Prices and Comparative Advantage Equilibrium-relative commodity price in isolation It is given by the slope of the common tangent to the nations production frontier and indifference curve at the autarky (in the absence of trade) point of production and Consumption. Case study 5-2: the capital stock per worker for a number of leading developed and developing countries. Payments (BOP) is a summary of the economic endobj With the opening of trade, Nation 1 specializes in the production of X (and moves down its production frontier) while Nation 2 specializes in the production of Y (and moves up its own production frontier). January- December ?xjwm[onQ- th`/]?6yO`H[GS]KW-2__n).Q `w_wuu5o@dcSK;O]1p7i;@;&-JK}ZORnU_W,p]^Ng7JW 1.It serves as the basic link between the local and trade, as they increase the price of imported goods and services, making some factors that would INCREASE supply, causing the U.S. dollar to depreciate: Alternatively, some restrictive assumptions could be made. So they put their currency on the and quotas that also has the most of the commodity of which your country lacks. With trade, Nation 1 specializes in the production of commodity X (L-intensive commodity) and reduces its production of commodity Y(K-intensive commodity), the demand for labor rises causes the wages to rise while the relative demand for capital falls and its rate falls; on the other hand, in Nation 2 wages fall and rate rises; The Factor-Price Equalization Theorem Conclusion 1. International trade tends to reduce the pretrade difference in w and r between the two nations; 2. International trade keeps expanding until relative commodity prices are completely equalized, which means that relative factor prices have also become equal in two nations. International Economics: Introduction Sep. 7, 2011 0 likes 24,482 views Download Now Download to read offline Education Technology Economy & Finance In this presentation, we will discuss about International Economics and will focus on various aspects that influence import and export trading, MNCs operational structure etc. expected US price the foreign interests that demand dollars. endobj Nation 1 gains 20X and 20Y from its no-trade equilibrium point A by exchanging 60X for 60Y with Nation 2. international economics, International Economics - . endobj of a currency when its price is low and selling high.