ECON 205 Fundamentals of International Economics

International Economics provides the student with the foundations of the theory and practice of international trade and finance necessary for understanding the nature and consequences of linking the domestic economy and the world. Topics covered include: introduction to classical and modern international theories of trade; analysis of the economic effects of commercial policies like tariffs and quotas; economics of custom unions; balance of payments, spot and forward foreign exchange markets and exchange rate systems; balance of payments problems and the adjustment mechanisms; flexible and fixed exchange rate systems; and international monetary systems.

Credits

3

Prerequisite

ECON 101

Hours Weekly

3 hours weekly

Course Objectives

1. 1. Describe and explain the trend of U.S. international trade and investment since the Second World
   War.
2. 2. Identify major U.S. exports, imports and trading partners.
3. 3. Identify and evaluate current major international trade and financial initiatives and disputes
   involving the U.S. and its trading partners.
4. 4. Apply the principle of comparative advantage to understand the direction of flow of products
   among regions and nations.
5. 5. Evaluate the Ohlin factor proportions and intensity hypothesis of international trade.v
6. 6. Understand the Leontiff paradox about the factor intensity of U.S. exports.
7. 7. Explain why a country may manufacture and export a good and import a similar good from
   abroad.
8. 8. List recent major contributions to international trade theory and evaluate them emphasizing the
   gap they espouse to fill.
9. 9. Explain the merit of offer curves in international trade.
10. 10. Discuss alternative measures of the terms of trade.
11. 11. Discuss the economic effects of tariffs, quotas and other protective measures.
12. 12. Define the balance of payments, identify the major accounts, distinguish credit and debit
    transactions, and define balance of payments equilibrium, balance of payments deficit and
    balance of payments surplus.
13. 13. Describe the spot and forward foreign exchange markets, and explain how they determine the
    spot and forward exchange rates.
14. 14. Explain the consequences of an appreciated or a depreciated U.S. dollar on the U.S. balance of
    trade, GDP, employment and unemployment, and inflation.
15. 15. Describe the gold standard and explain how it adjusted to international trade deficits and
    surpluses.
16. 16. Describe the gold exchange standard and explain how it adjusted to balance of payments
    problems.
17. 17. Describe the free floating exchange rate system and how it adjusts to balance of payments
    problems.
18. 18. Describe managed exchange rate system and explain how it copes with trade deficits and surplus.
19. 19. Explain why the exchange rate of the U.S. dollar against the currencies of its major trading
    partners showed wider fluctuations after 1973.
20. 20. Identify the major innovation in international banking and finance during the last 30 years, and
    analyze their implications for production, employment, trade and finance.
21. 21. Demonstrate active listening skills by objectively restating, in his/her own words, material which
    has been verbally transmitted.
22. 22. Demonstrate the physical ability to speak effectively so that the receiver(s) can understand. This
    will include diction, pronunciation, enunciation, pace, pitch, and volume.
23. 23. Communicate an abstract or concrete idea so that the receiver(s) clearly perceives the intended
    message.
24. 24. Effectively deliver a formal oral presentation in front of a group.
25. 25. Demonstrate the ability to communicate using appropriate language.

Course Objectives

1. 1. Describe and explain the trend of U.S. international trade and investment since the Second World
   War.
2. 2. Identify major U.S. exports, imports and trading partners.
3. 3. Identify and evaluate current major international trade and financial initiatives and disputes
   involving the U.S. and its trading partners.
4. 4. Apply the principle of comparative advantage to understand the direction of flow of products
   among regions and nations.
5. 5. Evaluate the Ohlin factor proportions and intensity hypothesis of international trade.v
6. 6. Understand the Leontiff paradox about the factor intensity of U.S. exports.
7. 7. Explain why a country may manufacture and export a good and import a similar good from
   abroad.
8. 8. List recent major contributions to international trade theory and evaluate them emphasizing the
   gap they espouse to fill.
9. 9. Explain the merit of offer curves in international trade.
10. 10. Discuss alternative measures of the terms of trade.
11. 11. Discuss the economic effects of tariffs, quotas and other protective measures.
12. 12. Define the balance of payments, identify the major accounts, distinguish credit and debit
    transactions, and define balance of payments equilibrium, balance of payments deficit and
    balance of payments surplus.
13. 13. Describe the spot and forward foreign exchange markets, and explain how they determine the
    spot and forward exchange rates.
14. 14. Explain the consequences of an appreciated or a depreciated U.S. dollar on the U.S. balance of
    trade, GDP, employment and unemployment, and inflation.
15. 15. Describe the gold standard and explain how it adjusted to international trade deficits and
    surpluses.
16. 16. Describe the gold exchange standard and explain how it adjusted to balance of payments
    problems.
17. 17. Describe the free floating exchange rate system and how it adjusts to balance of payments
    problems.
18. 18. Describe managed exchange rate system and explain how it copes with trade deficits and surplus.
19. 19. Explain why the exchange rate of the U.S. dollar against the currencies of its major trading
    partners showed wider fluctuations after 1973.
20. 20. Identify the major innovation in international banking and finance during the last 30 years, and
    analyze their implications for production, employment, trade and finance.
21. 21. Demonstrate active listening skills by objectively restating, in his/her own words, material which
    has been verbally transmitted.
22. 22. Demonstrate the physical ability to speak effectively so that the receiver(s) can understand. This
    will include diction, pronunciation, enunciation, pace, pitch, and volume.
23. 23. Communicate an abstract or concrete idea so that the receiver(s) clearly perceives the intended
    message.
24. 24. Effectively deliver a formal oral presentation in front of a group.
25. 25. Demonstrate the ability to communicate using appropriate language.