International Economics

1. International
Economics I
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2. INTERNATIONAL ECONOMICS?
“International economics is the branch
of Economics which studies the
causes & consequences of economic
interactions between the nations.”

3. 2. “International economic studies how
economic interactions leads to inter-country
& intra-country allocations of the scarce
resources aimed at increasing the economic
well-being of their people.”

4. Different Nations
3.International economics deals with
the economic interdependence
among the nations of the world.”

5. ECONOMIC INTERDEPENDENCE
• Through the sale & purchase of goods & services
 Raw material, Semi-finished and Finished products
• Through the sale & purchase of financial assets
 Stocks, Bonds, Private Equity, Real Estate
• Through MNCs( Multinational corporations)
 Employment opportunities etc.
• Through domestic economic policies
 Government interventions, Example: Maize in Mexico vs. US

6. Trade
Purchase and Sale

7. TRADE
• Trade:-Exchange of goods & services between
two individuals or association of individuals.
• Domestic Trade:-Exchange of goods & services
between two individuals or firms in the same
country.
• Foreign Trade:-when exchange of goods &
services takes place between two individuals
or firms of two different countries.

8. Advantages Disadvantages
Exhaustion of
Use of resources resources
Effects on
Wider range of domestic
commodity industry
Consumption
Promote habits
competition
Provide
Speedy footholds to
industrialization foreigners
Environmental
Reduction in Issues
prices

9. Advantages of International Business
The main advantages of international business to a country are as follows.
1. Economy in the use of productive resources: each country tries to
produce those goods in which it is best suited. As the resources of each
country fully exploited. There is thus, a great economy in the use of
productive resources.
2. Wider rang of commodities: international business make it possible for
each country to enjoy the wide rang of commodities.
3. Promotes competition: international business promote competition
among different countries. The produces in home country, being afraid
of foreign competition, keep the price of their product at reasonable
level.
4. Speedy Industrialization: international business enable a backward
country to acquire skill, machinery and other capital equipments from
advanced countries for speeding up industrialization.
5. Fall of price: a country can export her surplus products to a country
which is need of them. The home price are, thus, prevented from
falling.

10. Disadvantages of international business.
The disadvantages of international business are as follows,
1. Exhaustion of resources: in order to earn present export advantages a
country may exploit her limited natural resources beyond proper limits.
This may lead to exhaustion of essential resources like iron, coal, oil etc.
2. Effect on domestic industries: if no restriction are placed on foreign
trade, it may ruin the domestic industries.
3. Effect on consumption habits: sometime it so happens that the trader
in order to make profits imports commodities which are very harmful
and injurious for the people. For instance, opium, wine, arms etc.
4. Environmental: Example Nigeria and Shell
5. Provides foothold to the foreigners: foreign trade provides foothold to
the foreigners in the country. For the example the role of East India
company came to sub continent as traders and than hold the whole
government of subcontinent.
6. Discus more advantages and disadvantages!!!

11. MNC’s( Multinational corporations)
Explanation:
MNC’s? A large scale
• A head quarter in one business, where the
country but having operation
main head office
in other countries for
examples, Suzuki, ford situated in one country
motors, MacDonald, shell while the business
etc are MNC’s operation perform in
another country or
countries is called
Multinational
corporation.

12. Activities of Multinational Corporations ( MNC’s)
• Explanation:
Exports and imports • Normally any
international business in
the form of MNC’s
perform two type of
business operation
Foreign Direct investment throughout the world,
1. The first one, Exports
and Imports,
2. And the second one is
Foreign Direct
Investment

13. Export Goods- Money Comes Into the
Country
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14. Import Goods- Money Goes Out of
Country
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15. Explanation
Exports: Goods and services produced by a firm in one country and then
sent into another country is called exports.
Imports: goods and services produced in one country and bought in by
another country is known as imports.

16. Foreign Direct Investment
FDI ? Foreign Direct investment.
The investment of equity funds in another country or countries
(productive assets) known as FDI. (inward – outward = net)
• Cash inflow  Income
• Employment opportunities  Living standard rises
• International networks  Export increases
• R&D budget  increased productivity
• Transfer of skills and technology (India and China)

17. Why FDI is important?
The drivers of International Business and many
companies wants to establish a place in world
market by setting business operations in other
country of countries. These drivers/firms or
companies needs a large market share
through out the world. So it is necessary to
established their production unit or units out
side their home country.