The Purpose of the Chapter

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Transcript The Purpose of the Chapter

Chapter 1
International Economics and the Global Economy
To most economists, the evidence is impressively persuasive
that the dramatic increase in world competition–a
consequence of broadening trade flows–has fostered
markedly higher standards of living for almost all countries
that have participated in cross-border trade.
(Alan Greenspan)
International
Economics
The Goals of This Chapter
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Explain why economists use models
Define globalization
Describe the current level of globalization
Encourage curiosity about why globalization
occurs
Encourage students to think about the future
course of globalization
Introduce the remainder of the book
International
Economics
The Three Components of Globalization
• International trade
• International investment
• International migration
International
Economics
What Is an Economic Model?
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Simplified representation of reality
Logical representation of economic activity
Focuses on relationships that are important
for a particular issue
Omits details deemed less relevant to the
issue at hand
Models are sometimes referred to as theories
or paradigms
International
Economics
Types of Models
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The textbook will use four categories of models
General equilibrium models
Partial equilibrium models
Static models
Dynamic models
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These four categories are not mutually exclusive
General and partial equilibrium models can be static
or dynamic
International
Economics
The Analytical Approach of the Textbook
• Examine globalization’s partial and
general equilibrium effects
• Examine globalization’s domestic and
foreign effects
• Examine globalization’s static and the
dynamic effects
International
Economics
The Extent of Globalization
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Fewer than 2 out of 100
people immigrate
during their lifetimes
Immigrants as a Percentage
of the World’s Population
People Still Living
in Native Country
98%
2%
Immigrants
International
Economics
The Extent of Globalization
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Exports as a Percentage
of the World’s Production
Trade is less than 20%
of world GDP
Domestic
Production
Consumed at
Home
82%
Exports
18%
International
Economics
Figure 1.2
U.S. Exports/Production: 1879 - 1997
Source: U.S. Bureau of the Census
International
Economics
How Will Globalization Evolve in the Future?
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The world has achieved unprecedented levels
of international economic integration
The effects of international trade, investment,
and migration are easily recognizable
throughout nearly all economies
It is still not clear, however, whether people
will continue to support globalization
Will people support the policymakers who
offer to restrict or reverse international
economic integration?
International
Economics
Previous Globalization
Episodes Were Reversed
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The Roman Empire split into isolated regions
China closed its borders in 1200 after
achieving world technological superiority
Most countries intentionally cut international
trade and investment after World War I
Many developing countries instituted
protectionist trade policies during the latter
half of the 20th century
International
Economics
Some of the Textbook’s Unique Features
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A full chapter on the relationship between
international trade and economic growth
Thorough analysis of international migration
and immigration policy
Frequent extensions to other fields such as
business, political science, and history
Case studies are spread throughout the textbook
to illustrate and emphasize key conclusions
Full chapters examine economic policies that
address issues related to the three components
of globalization
International
Economics
Figure 1.9
Globalization: The Complete Picture
The Rest of
the Economy
History
Institutions &
Past Growth
International
Economic
Activity
Economic
Growth
Future
Expectations
The Rest of
the World
International
Economics
Figure 1.9
Globalization: The Complete Picture
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Every economic event is
related to other economic
activities occurring elsewhere
in the domestic economy
Every economic event is
linked to past economic
events
Through expectations, every
event is linked to the future
In summary, in an open
economy, every event is
linked to other past, present,
and future economic events in
the rest of the world
The Rest of
the Economy
History
Institutions &
Past Growth
International
Economic
Activity
Economic
Growth
Future
Expectations
The Rest of
the World
International
Economics