Macroeconomics Unit VI - Open Economy, International Trade and FinanceThis is a featured page

Ch. 35: International Trade
To understand the complicated language of international economics in our global society, it is important to build a deeper understanding of the benefits and challenges of international trade. Our very presence here in Shanghai is testament to the emergence of China as an economic superpower with an economy built on trade itself.

In this chapter you will learn:
  • The graphical model of comparative advantage, specialization, and the gains from trade.
  • How differences between world prices and domestic prices prompt exports and imports.
  • How economists analyze the economic effects of tariffs and quotas.
  • The rebuttals to the most frequently presented arguments for protectionism.
  • About the assistance provided workers under the Trade Adjustment Act of 2002.
  • How the offshoring of U.S. jobs relates to the growing international trade in services.


    Chapter 36: Exchange Rate, the Balance of Payments, and Trade Deficits
    If you're at all like your Economics teacher, then living in China means having the ability to constantly convert RMB prices to dollar prices. But these days, converting RMB prices to dollar prices has become a constant challenge! Since Mr. Welker arrived in Shanghai, the exchange rate has gone from 8.2 RMB per dollar to 6.99 today! What causes these fluctuations in exchange rate? What impact does exchange rate have on trade between nations? What is the "balance of payments" and what is the difference between flexible and fixed exchange rates? Should Americans be concerned about their enormous trade deficit with countries like China?

    In this chapter you will learn:
    • How currencies of different nations are exchanged when international transactions take place.
    • About the balance sheet the United States uses to account for the international payments it makes and receives.
    • How exchange rates are determined in currency markets.
    • The difference between flexible exchange rates and fixed exchange rates.
    • The causes and consequences of recent record-high U.S. trade deficits.

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    tsaojames1991 Current Accout and Captial Account (page: 1 2) 28 May 4 2008, 5:03 AM EDT by drewvenkatraman
    Thread started: Apr 25 2008, 9:21 AM EDT  Watch
    When two countries trade, most times one country ends up with a positive current account and a negative capital account while the other country ends up with a negative current account and a positive capital account. ( such as China and the U.S). What are the advantages and disadvantages of both sides? Which country would you rather be? why?
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    kevinyeh Exchange Rates 6 Apr 29 2008, 1:52 PM EDT by MondGu
    Thread started: Apr 28 2008, 10:31 AM EDT  Watch
    If pegging the US exchange rate is so beneficial, why don't all countries just try to do that to keep the US dollar strong and keep the global economy booming?
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