Question

Review Exercises questions 1-4 page 13

REVIEW EXERCISES:

1. Why are you interested in international economics? What is motivating you? How are your interests, major, or profession affected by the world economy?

2.   What are the four windows on the world economy?

3.   What is the difference between trade in goods and trade in services?

4. What is the difference between international trade and foreign direct investment?

Answer 1

FIRST POINT

the most interesting part of the international economics is that it is one of the most practical concept.it provides the educational concept that how an economy work.

the concepts which motivates for the study of international economics are

• wide scope of study
• practical concept
• It shows how one country depends on other countries for goods and services and how they fulfill each others demand by executing import and export obligations.

international economics is helpful in various manner

1. study and compare the economic growth of various countries
2. to track and predict the stock market of various countries
3. the positive impact of a dealing like invention of new mechanism of machinery or manner of production and negative impact of a dealing like trade war

SECOND POINT

four windows on world economy-

1. window concerned with international trade
2. window concerned with international production
3. window concerned with international finance
4. window concerned with international development

THIRD POINT

TRADE IN GOODS VS TRADE IN SERVICES-

1. when dealings are made for the capital goods , machine and tangible items this is known as trade in goods.this is included in Balance of trade.
2. when dealings are made in intangible things like insurance,telecom and financial services this is known as trade in services.this is not included in Balance of Trade.

FOURTH POINT

FOREIGN TRADE AND FOREIGN DIRECT INVESTMENT-

1. when any dealing is made for consideration at a bilateral basis of monetary fulfillment and contract is discharged by the consideration this is known as foreign trade.these are frequent business dealings among countries.
2. when a country makes investment in the capital asset of some other countries posses ownership and have the influencing /controlling and decision making power respect to the investment , this is known as FDI (foreign direct investment).these are long term business investment.