20.04.2023 International Economics#

Learning Objectives:

  • international and domestic economic issues

  • recurring themes

  • trade / monetary distinguish

International Economics: How nations interact trough trade (of goods and services) and finance (flows of money and investment)

History of Trade:

img

Gravity Model#

How much do people trade with each other?

\[ T_ij = \frac{A \times Y_i \times Y_j}{D_{ij}} \]

  • A = constant term

  • D = Distance

  • Y = GDP of respective country

Anomalies: (EU and US)

  • Ireland = cultural affinity

  • Netherlands = transport cost advantages

=> more Trade than predicted

other Aspects (not in Model):

  • cultural affinity

  • geography

  • Multinational Corps.

  • Borders

Trade Products#

mostly manufactured goods

img

changes especially in developing countries:

  • historical: agricultural products

  • now: manufactured goods

img

Service Outsourcing#

in US, currently not significant

  • most jobs are not tradable

  • the tradable jobs are still often in the US

Exercise I:#

Exam:

  • Derivatives (basic calculus)

  • graphs

  • 60 Minutes

Supply and Demand#

  • Supply: \(p = 0,5x +20\)

  • Demand: \(p = -0,75x+50\)

  • Ueqilibrium: \(x = 24, p=32\)

Interventions:

  • Government Minimum Price: \(p = 38\)

    • Demand: \(-12 = -0,75x \to x = 16\)

  • Fixed cost increases: new Supply: \(0,5x+30\)

    • new Equilibrium: \(x = 16, p=38\)

  • government demand subsidys: \(p = -x+50\)

    • new eq.: \(x= 20, p = 30\)

International Trade#

Degree of Openness: \(\frac{exports+imports}{GDP}*100\%\)

World Economy is concentrated in Europe / North America / Southeast Asia

Types of Trade#

  • Intraregional Trade

    • between partners of economic integration space (EU, NAFTA)

  • Interregional Trade

    • between different spaces / countries

GDP#

Calculation: Private Con+ Governemnt Con + Investments + Exports - Imports