Summary International Economics is a valuable branch of Economics dealing with how trade benefits nations. Several theories have been propounded on causes of international trade starting from Adam Smith. The controversy over the need for a separate theory has been resolved by the Modern Theory of International Trade. The gains from trade, Terms of Trade, Balance of Payments constitute the major areas of discussion.
The Exchange rate, either fixed or flexible is a major factor determining the economic strength of the nation. In the line of foreign trade and foreign capital, foreign investment (especially FDI) plays a major role in determining economic development of Less Developed Countries and developing countries. international trade has helped the economically developed countries largely and disappointed many African and Asian countries. The international economic organizations such as IMF, IBRD and WTO and the trade blocs SAARC, ASEAN and BRICS which play a vital role in international trade are covered in the next chapter.
Glossary International Economics: A special branch of Economics which primarily deals with the basics of international trade. Internal Trade: A trade within the geographical boundary of a particular nation. International Trade: A trade between two or more countries and it is a trade beyond the geographical and political boundaries. Absolute Cost Differences: The difference in the actual costs of production of a commodity between two nations.
Comparative Cost Differences: The difference in the absolute costs of production of two commodities between two countries. Factor Endowment: Abundance in the availability of a factor in a country. Think and Do . Suppose the exchange rate between Indian Currency and US Dollar is ₹ = $ .
If it changes to ₹ = $ , the value of which currency increased and decreased? . Suppose a doctor from England is invited to diagnose the health status of a VIP in our State. The fees which we pay to the doctor are entered in to which account of the BOPs Account?
- - International Economics Terms of Trade: The rate at which