Inmternational economics

The study of economics would be incomplete without an understanding of the nation’s role in the world economy. The study of the world economy is known as “international economics”. International economics embraces two broad areas of interest: international trade and international finance. World trade has been gaining increasing significance among nations. Why do nations trade? The answer is that nations have different quantities and qualities of economic resources and different ways of combining them. As a result, each country can produce certain goods more efficiently, or at relatively lower costs, than others. This idea can be stated somewhat differently. Imagine a world consisting of only two countries, each producing the same goods. Under such circumstances, the alternative or opportunity cost to each country of producing more of one good is the amount of the second good that must be sacrificed. In view of this, which of the two goods should the countries produce? The answer is that each should specialize. When two parties engage, the sacrifice that each makes to obtain something from the other is called the “terms of trade”. For example, in order to buy a book, you might have had to give up five visits to the movies. Your terms of trade, therefore, are 5 movies = 1 book. The terms of trade for a given transaction equal the number of units of goods that must be given up for one unit of goods received by each party to the transaction. Or in other words, terms of trade are defined as the ratio of the prices of its export commodity to the price of its import commodity. Despite the fact that trade is of great importance for each nation, all countries impose restrictions of one form or another to protect some of their domestic industries. The restrictions may be of several types: tariffs, import quotas, nontariff barriers. Tariffs are customs duties or taxes imposed by a government on the importation of a good. Tariffs may be (1) specific, in the form of a tax per unit of the commodity, or (2 ) ad valorem, based on the value of the commodity. Import quotas are laws that limit the number of units of a commodity that may be imported during a specified period. Nontariff barriers are any laws or regulations, other than tariffs, that nations impose in order to restrict imports. For instance, to “protect the health and safety” of their citizens, many countries establish higher standards of quality for various kinds of imported goods than for similar goods produced domestically.

Questions:

1.What is international trade?

2.What is international trade and finance?

3.Enumerate the types of restrictions.

Exercises:

Ex. 1. Complete the following sentences with the words from the essential vocabulary. Add noun, verb or adverb endings if necessary.

1. Home... is a subject studied at school and college in which students are taught how to run a house well and efficiently.

2. New England’s... is still largely based on manufacturing.

3. All Western... are competing against each other.

4. These businesses contribute hundreds of millions of pounds to the... of the country.

5. I switched off the lights as an... measure.

6. If you make..., you take action in order to save money, by not spending it on unnecessary things.

7. You’ll have to travel... class.

8. Buy our new... packs of 100.

9. If you are really going to buy a car, we’ll have to... on other things.

10. In his works he explains the ideas of the great English... J.M. Keynes.

11. She thought of herself as an... wife.

12. This system was extremely... because it ran on half-price electricity.

13. What has gone wrong with the... system during the last ten years?

14. The book is very … written, but very warm.

15.... is the oldest of social sciences.

Ex.2. Translate and use these words in the following sentences: