Introduction to International Economics
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Questions and Answers

What was the primary exchange mechanism during the period of 1870-1913?

  • Internationalised supply chains
  • Gold standard (fixed-exchange rates) (correct)
  • Reduction of trade barriers and capital controls
  • Flexible exchange rate systems

    • What led to the collapse of the gold standard?

  • Reduction of trade barriers and capital controls
  • Opening up of new territories
  • Improvements in telecommunication and transportation
  • Rise in protectionism and two world wars (correct)

    • What is the current global economic trend since 2009?

  • Globalisation
  • Deglobalisation (correct)
  • Internationalisation of supply chains
  • Liberalisation of financial markets

    • What was established during the period of 1945-1980?

    <p>Bretton Woods regime</p> Signup and view all the answers

    What is a characteristic of the period of 1980-2008?

    <p>Internationalised supply chains</p> Signup and view all the answers

    What is a consequence of the financial market crisis?

    <p>Slowdown of lending and trade</p> Signup and view all the answers

    What is a characteristic of mercantilism?

    <p>Tariffs that limit trade</p> Signup and view all the answers

    What determines the country with an absolute advantage?

    <p>The country with the lowest amount of resources required to produce a good</p> Signup and view all the answers

    What is an example of an endogenous cause of absolute advantage?

    <p>Higher labor productivity</p> Signup and view all the answers

    What happens when countries specialize and export goods for which they have an absolute advantage?

    <p>Total world production rises</p> Signup and view all the answers

    What is globalization described as?

    <p>The development of rising economic integration</p> Signup and view all the answers

    What is an indicator of globalization?

    <p>Trade volume</p> Signup and view all the answers

    Why do countries gain from trade?

    <p>Because they specialize in goods with absolute advantages</p> Signup and view all the answers

    What are the causes of absolute advantages partly influenced by?

    <p>Both exogenous and endogenous factors</p> Signup and view all the answers

    What is the main purpose of the Atlas of Economic Complexity?

    <p>To provide a platform for international economics research</p> Signup and view all the answers

    What is one of the negative aspects of globalization mentioned in the lecture?

    <p>Lower incomes and loss of employment</p> Signup and view all the answers

    What is the primary goal of mercantilism?

    <p>To restrict imports and maximize exports</p> Signup and view all the answers

    What is the result of a zero-sum game in international trade?

    <p>One country gains and the other loses</p> Signup and view all the answers

    What is one of the benefits of globalization mentioned in the lecture?

    <p>Harmonization of available goods</p> Signup and view all the answers

    What is the primary measurement of wealth in mercantilism?

    <p>Stock of metal</p> Signup and view all the answers

    What is the concept that suggests that voluntary trade can be a win-win situation?

    <p>Gains from trade</p> Signup and view all the answers

    Which of the following organizations provides data on international trade?

    <p>All of the above</p> Signup and view all the answers

    What is the primary focus of international economics for businesses?

    <p>Global value chains in production</p> Signup and view all the answers

    What is the structure of the course divided into?

    <p>Lectures and exercises</p> Signup and view all the answers

    What is one of the learning objectives of the course?

    <p>To use economic models to understand gains from trade</p> Signup and view all the answers

    What is the duration of the written exam?

    <p>90 minutes</p> Signup and view all the answers

    What types of questions can be expected in the written exam?

    <p>Single choice, brief explanation of terms, and short answers</p> Signup and view all the answers

    What is attached to the exam papers?

    <p>A formulary</p> Signup and view all the answers

    When is the post-exam review?

    <p>In September and March</p> Signup and view all the answers

    What is the primary resource for the course?

    <p>Salvatore, D.</p> Signup and view all the answers

    What is the main purpose of international economics for businesses?

    <p>To understand global value chains in production</p> Signup and view all the answers

    What is one of the aspects of international economics that businesses need to observe?

    <p>What managers have to observe in an international context</p> Signup and view all the answers

    Why was it difficult to transport meat and animal fat over long distances before 1895?

    <p>Due to the lack of transport technology for perishable goods</p> Signup and view all the answers

    What is the reason why copper has lower transport costs compared to iron ore?

    <p>Copper is lighter than iron ore</p> Signup and view all the answers

    What happened to the market power of sugar producers?

    <p>It increased</p> Signup and view all the answers

    What does 'capital export' mean?

    <p>Investing in foreign companies</p> Signup and view all the answers

    What does 'net' mean in the context of capital export?

    <p>The total value of exports minus imports</p> Signup and view all the answers

    Why do countries export and/or import capital?

    <p>To diversify their economies</p> Signup and view all the answers

    Which country has an absolute advantage in producing cocoa?

    <p>Ghana</p> Signup and view all the answers

    What is the definition of absolute advantage?

    <p>A country can produce a good with the lowest resource input</p> Signup and view all the answers

    Study Notes

    Introduction to International Economics

    • International economics is relevant for businesses due to global value chains, foreign competitors, product innovations, and foreign markets and demand.
    • Access to financial markets and regulation of trade, production, and prices are essential for businesses.

    Structure and Tools of the Course

    • The course will cover theoretical building blocks, empirical overviews, and economic tools.
    • The course will include exercises, such as check your knowledge, apply your knowledge, and model-based reasoning.

    Learning Objectives of the Course

    • Understand the gains from trade, patterns of trade, and negative aspects of globalization.
    • Analyze barriers to trade and their impact on trade and welfare.
    • Familiarize yourself with concepts of international statistics and stylized facts.
    • Compare determinants of exchange rates and understand how they affect international businesses.
    • Know the institutions that shape world trade and economic integration.
    • Make use of models for policy recommendations to reduce current account imbalances and exchange rate fluctuations.
    • Learn what managers have to observe in an international context.

    Written Exam

    • The exam will be offered in July 2024 and January/February 2025, with the same conditions and content.
    • The exam will consist of single-choice questions, brief explanations of terms and concepts, short answers, analyses of graphs and tables, calculations, and paraphrase and discussion of statements.
    • A formulary will be attached to the exam papers.

    Preparation for the Course and Exams

    • Slides, handouts, and additional resources will be available via Moodle.
    • The course will mainly use Salvatore, D. World, as well as sources from the World Bank, IMF, WTO, and OECD.

    A New Phenomenon?

    • The phenomenon of globalization has evolved over time, with different phases of globalization and deglobalization.
    • The gold standard, protectionism, and two world wars led to the collapse of the gold standard.
    • The Bretton Woods regime, improvements in telecommunication and transportation, and the rise of international capital flows and liberalized financial markets have contributed to globalization.

    Globalization: Good or Bad?

    • Globalization has both positive and negative aspects, including more competition, harmonization of available goods, interdependent production processes, and the free flow of factors.
    • The negative aspects include lower incomes, loss of employment, and the spread of crises.

    Absolute Advantage

    • Mercantilism, a dominant doctrine in the 16th-17th century, saw trade as a zero-sum game, where one country's gain was another country's loss.
    • Adam Smith argued that voluntary trade can lead to gains from trade, making it a win-win situation.
    • A country has an absolute advantage in the production of a good if it can produce it with the lowest resource input of all countries.
    • Absolute advantage can be due to exogenous factors, such as natural resources, or endogenous factors, such as technology and education.

    In a Nutshell

    • Globalization describes the development of rising economic integration and interdependencies between countries.
    • There have been different phases of (de)globalization due to structural changes.
    • Indicators help us to describe and analyze globalization and trade.
    • Absolute advantage means that a country can produce a good or service with lower resource input than all other countries.
    • A country gains from trade if it has an absolute advantage in the production of a good or service and specializes in it.

    Exercises

    • Understanding statistics: capital export and import, and the concept of "net" in international trade.
    • A numerical example of absolute advantages: Ghana and South Korea's production of cocoa and rice.
    • Definition of absolute advantage: a country has an absolute advantage in the production of a good if it is more productive, i.e., it can produce it with the lowest resource input of all countries.

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