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Summary Recap International Economics For E&BE
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  • Course
  • International Economics For E&BE
  • Institution
  • Rijksuniversiteit Groningen (RuG)
  • Book
  • International Economics

Summary study book International Economics of Robert C. Feenstra, Alan M. Taylor - ISBN: 9781429278423, Edition: 3rd ed. 2015, Year of publication: - (lectures + recap)

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  • Yes
  • June 21, 2021
  • 4
  • 2020/2021
  • Summary

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  • international
  • economics

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  • Rijksuniversiteit Groningen (RuG)
  • Bsc Economics And Business Economics
  • International Economics For E&BE
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International economics
Chapter 1 – 8

Chapter 1; trade in the global economy;

A country’s trade balance is the difference between its total value of exports and its total value of
imports (usually including both goods and services)
 Trade surplus; export > import
 Trade deficit; import > export

Horizontal FDI; when a firm from one industrial country owns a company in another industrial
country.
Vertical FDI; when a firm from an industrial county owns a plant in a developing country.

Chapter 2; trade and technology: the Ricardian model:

Why do countries trade good with one another:
 Difference in the technology used in each country.
o Absolute advantage; when a country has the best technology for producing a good.
o Comparative advantage; a country has comparative advantage in producing those
goods that it produce best compared with how well it produces other goods.

 Difference in the total amount of resources found in each country. (Labour, capital, and land
= called factors of production)
o Natural resources; such as land and minerals.
o Labour resources; labour of various education and skill levels.
o Capital; machinery and structures.

 Differences in the costs of offshoring.

 The proximity of countries to one another.
o Free-trade area; in which the countries have no restrictions on trade between them.

Ricardian model: this model explains how the level of a county’s technology affects the wages paid
to labour, such that countries with better technologies have higher wages.
This , in turn, helps to explain how a country’s technology affects its trade pattern, the products that
it imports and exports.
 Suppose that both goods are produced with labour alone.

Marginal Product of Labour (MPL); the extra output obtained by using one more unit of labour.
Production possibilities frontier (PPF); A straight line between these two points at the corners.
 QX = MPLX * LX
 Slope = - (MPLX/MPLY)
 The slope is also the opportunity cost of X. the amount of Y that must be given up to obtain
one more unit of X.

Indifference curve; shows the combinations of two goods, such as X and Y, that a person or economy
can consume and be equally satisfied.
The indifference curve is associated with a given level of satisfaction, or utility.

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