Teaching Program of INTERNATIONAL ECONOMICS
Teaching Program
Chapter 1 Introduction
Chapter 2 The Law of Comparative Advantage
Chapter 3 The Standard Theory of International Trade
Chapter 4 Demand and Supply, Offer Curves, and the Terms of Trade
Chapter 5 Factor Endowments and the Heckscher-Ohlin Theory
Chapter 6 Economies of Scale, Imperfect Competition, and International Trade
Chapter 7 Economic Growth and International Trade
Chapter 8 Trade Restrictions: Tariffs
Chapter 9 Nontariff Trade Barriers and the New Protectionism
Chapter 10 Economic Integration: Customs Unions and Free Trade Areas
Chapter 11 International Trade and Economic Development
Chapter 12 International Resource Movements and Multinational Corporations
Chapter 13 Balance of Payments
Chapter 14 Foreign Exchange Markets and Exchange Rates
Chapter 15 Exchange Rate Determination
Chapter 16 The Price Adjustment Mechanism with Flexible and Fixed Exchange Rates
Chapter 17 The Income Adjustment Mechanism and Synthesis of Automatic Adjustment
Chapter 18 Open-economy Macroeconomics: Adjustment Policies
Teaching Program of
INTERNATIONAL ECONOMICS
课程号：0022059大纲编写人：赵有广
Ⅰ. The School of International Economy and Trade gives the course
Ⅱ. The Target of the Teaching Program
Undergraduate Major of International Economy and Trade
Ⅲ. Teaching Goals and Requirements
1. Students should not only know the great development of the productive forces stimulated by postwar sciences and technology, which had generated the economy globalization, and the necessity to study International Economics on such background, but also distinguish correctly the basic theory in the course with direction of Marxist theory, and discard the dross and select the essential. Students should grasp the system of the course, and connect the theory of the course with practice.
2. Students should realize the basic reasons for international trade, especially the necessity of international transaction and the general law in the activity of such transaction, and the trade policies adopted according to these trade theories.
3. Students should realize the effects of the international flow of the product factors, by the transnational corporations, on the integration of international economy and the economic globalization, and the development of each nation.
4. Students should realize the nature of monetary; especially the nature that monetary flows among nations. Such flows reflect the flows of commodity and all kinds of product factors in the world. The flows influence the balance of payment and then the equilibrium development of economy in one nation.
5. Students should realize and understand the history and future of the generation and development of international productivity relationship or the international economic relationship which bases on the international economic activity since the primitive accumulation of capital. Also students should grasp the status and prospects of developing countries, in international economy and international economic relationships.
6. Students should grasp and use basic tools of quantitative analysis, especially the qualitative analysis about the international economy, which can help students to make some preparation in methodology for their future study and works. Especially, for the students who want to do foreign economic activities, to study the course can improve their working ability in practice to varying degrees, and serve the further development of our nation.
7. Student should grasp the methods in studying the International Economics, for good methods are the guarantee for studying the course. International Economics is the branch of Western Economics, its’ theory bases is Microeconomics and Macroeconomics. So students must have a strong basic knowledge about economics, otherwise they cannot understand well the International Economics.
Ⅳ. Class hours and their distribution
Total hours: 54. Class hours’ distribution is showed in table 1.
TABLE 1 CLASS HOURS AND THEIR DISTRIBUTION
| CHAPTERS | CONTENTS | HOURS |
| 1 | Introduction | 1 |
| 2 | The Law of Comparative Advantage | 4 |
| 3 | The Standard Theory of International Trade | 4 |
| 4 | Demand and Supply, Offer Curves and the Terms of Trade | 2 |
| 5 | Factor Endowments and the Heckscher-Ohlin Theory | 4 |
| 6 | Economies of Scale, Imperfect Competition and International Trade | 2 |
| 7 | Economic Growth and International Trade | 2 |
| 8 | Trade Restrictions: Tariffs | 3 |
| 9 | Nontariff Trade Barriers and the New Protectionism | 2 |
| 10 | Economic Integration: Customs Union and Free Trade Areas | 3 |
| 11 | International Trade and Economic Development | 2 |
| 12 | International Resource Movements and Multinational Corporations | 4 |
| 13 | Balance of Payments | 1 |
| 14 | Foreign exchange markets and Exchange rate | 4 |
| 15 | Exchange Rate Determination | 4 |
| 16 | The Price Adjustment Mechanism with Flexible and Fixed Exchange Rate | 4 |
| 17 | The Income Adjustment Mechanism and Synthesis of Automatic Adjustment | 4 |
| 18 | Open-Economy Macroeconomics: Adjustment Policies | 4 |
| TOTAL | | 54 |
Ⅴ. Examination
Here is the structure and the requirements of the test paper.
TABLE 2 STRUTURE AND THE REQUIREMENTS OF THE TEST PAPER
| KINDS OF QUIZ | NUMBERS, POINTS | POINTS |
| Terms Explanation | 5 items, each is worth 4 points | 20 points |
| Single Choice | 20 items, each is worth 2 points | 40 points |
| Briefly expound | 2 items, each is worth 10 points | 20 points |
| Calculation | 1 item, 10 points | 10 points |
| Give explanation through a fig | 1 item, 10 points | 10 points |
| TOTAL POINTS | 100 points | |
Ⅵ. Teaching Material
Dominick Salvatore,International Economics.清华大学出版社，2004年版。
Ⅶ. Main Reference
1. Dominick Salvatore. International Economics国际经济学（第五版）（朱宝宪等译），清华大学出版社，1998年版。
2. Paul R. Krugman & Maurice Obstfeld,International Economics Theory and Policy国际经济学理论与政策（第四版）（海闻等译），中国人民大学出版社，1998年版。
3. Dennis R. Appleyard & Alfred J. Field Jr.,International Economics.国际经济学（第三版）（龚敏等译），机械工业出版社，2001年版。
4. Gilancarlo Gandolfo,International Economics.国际经济学（第二版）（王小明等译），中国经济出版社，1999年版。
5．薛敬孝、佟家栋顾问，李坤望主编：国际经济学，南开大学出版社，2005年版。
6.Robert J.Carbaugh原著，原毅军编审，International Economics.高等教育出版社，2005年版。
Ⅷ. Teaching Outline
Chapter 1 Introduction
Teaching goal and requirements:
The purpose of this chapter is to induce the general contents of international economics. In this chapter, students should know the importance of international economics, the special focus of International Economics and why the International Economics is divided into microeconomics and macroeconomics.
Teaching focus points:
1.3 The subject matter of International Economics.
1. The studying objects of International Economics.
2. The special focus of International Economics.
3. Why is the International Economics divided into microeconomics and macroeconomics?
1.4 Purpose of International Economics theories and policies
1. The purposes of International theories and policies.
2. The methods realizing such purposes of International theories and policies.
(The second best theories should be omitted)
Chapter 2 The law of comparative advantage
Teaching goal and requirements:
In this chapter, students should know the development of trade theory form the 17th century to the first half of 20th century. Students should understand the basic questions in this chapter, which are as follows: what is the basis for trade and what are the gains from trade? What is the pattern of trade?
Teaching focus points:
2.3 Trade based on absolute advantage: Adam Smith
2.3A Absolute advantage
1. The concept of absolute advantage.
2. The keys in absolute advantage are: 1) Every nation has its’ own absolute advantage in the production of at least any one commodity of all, through the nation has absolute disadvantage in production of all other commodities, 2) The nation will specially product only such a commodity, 3) the nation will exchange its own commodity with another nation for another special kind of commodity and, 4)★resources of the two nations will are utilized in the most efficient way,★the output of both nations will rise,★the two nations will trade with each other.
3. Conclusion: Both nations would benefit if each specialized in the production of the commodity of its absolute advantage and then traded with the other nation.
2.3B Illustration of absolute advantage
Key of this section: the table2.1. From the table, students should know how the division of labor would take place between U.K. and U.S.
2.4 Trade based on comparative advantage: David Ricardo
2.4A The law of comparative advantage
The content of the law of comparative advantage
2.4B The gains from trade
The key is to know how two nations can gain from trade and the amount each nation can gain.
2.4D Comparative advantage with money
Here we only pay attention to the comparative advantage on the given wage rate, what about the exchange rates may be omitted.
2.5 Comparative advantage and opportunity costs
A number of simplifying assumptions being the basis of the law of comparative advantage
2.5B The opportunity cost theory
1) The concept of the opportunity cost theory, 2) the relationship between the opportunity cost and comparative advantage
2.5C The production possibility frontier under constant costs
The keys of this section are: 1) the figure illustration of the constant costs, 2) why are the opportunity costs constant?
2.5D opportunity costs and relative commodity prices
Keys are: 1) the concept of relative commodity prices, 2) different relative commodity prices reflect the different comparative advantage and provide the basis mutually beneficial trade, 3) when the cost is constant, the relative price line overlaps the production possibility frontier.
2.6 The basis and the gains from trade under constant costs.
2.6A Illustration of the gains from trade
The key is content of the figure 2.2.
2.6B Relative commodity prices with trade
Key: understand the figure 2.3.
Chapter 3 The standard theory of international trade
Teaching goal and requirements:
In this chapter, students should realize the basis for and the gain from trade, as well as the pattern of trade in the more realistic case of increasing costs. Then students should understand how the forces of supply and demand determine the equilibrium-relative commodity price in each nation in the absence of trade under increasing costs. This will also indicate the commodity of comparative advantage for each nation. Subsequently, students should understand how, with trade, each nation gains by specializing in the production of the commodity of its comparative advantage and exporting some of its output in exchange for the commodity of its comparative disadvantage.
Teaching focus points:
3.2 The production frontier with increasing costs
3.2A Illustration of increasing costs
The key is why the costs are increasing, which is also the meaning of the PPF (i.e. production possibility frontier) being concave from the origin.
3.2B The marginal rate of transformation
The concept of MRT (review the course “Western Economics”)
3.2C Reasons for increasing opportunity costs and different production frontiers
Keys of this section are 1) why do the opportunity costs arise? 2) Why is nation 1’ production frontier different from that of nation 2?
3.3 Community indifference curves
The meaning of community indifference curves and the difference between such a low curves and a high such curves.
3.3A Illustration of community indifference curves
Understand: 1) the shape of community indifference curves, 2) its’ slope is negative, 3) the meaning of moving along a curve or moving to a higher curve.
3.3B The marginal rate of substitution
1) The concept of MRS (review the course “Western Economics”), 2) the MRS is given by the slope of the community indifference curve at the point of consumption, 3) its feature is declining, so it convexes from the origin.
3.4 Equilibrium in isolation
The concept of equilibrium in isolation: In the absence of trade, a nation is in equilibrium when it reaches the highest indifference curve possible gives its production frontier. This occurs at the point where a community indifference curve is tangent to the nation’s production frontier.
3.4A Illustration of equilibrium in isolation
Know the background of the figure of equilibrium in isolation that is how we can get the equilibrium point.
3.4B Equilibrium-relative commodity prices and comparative advantage
1) How to get the equilibrium-relative commodity prices and comparative advantage, 2) To compare the relative price determined by increasing costs with that determined by constant costs.
3.5 The basis for and the gains from trade with increasing costs
When each nation specializes in producing the commodity of its comparative advantage, it incurs increasing costs. Specialization will continue until relative commodity prices in the two nations become equal at the level at which trade is in equilibrium.
3.5A Illustration of the basis for and the gains from trade with increasing costs
Understand the figure illustrating the basis for and the gains from trade with increasing costs, especially so-called trade triangle.
3.5B Equilibrium-relative commodity prices with trade
Not taking the tastes of the two nations into account, the equilibrium-relative prices with trade can be reached automatically. In the two trade triangles, when the distances of the two sides are same, the slope of another side is decided.
3.5C Incomplete specialization
Why is there the incomplete specialization?
3.5D Small-country case with increasing costs
The core in a small-country case is that the small country’s increase of export of commodity X will not affect the price of such commodity X in other country or the world.
3.5E The gains from exchange and from specialization
The core of this section is to understand why a nation’s gains from trade can be broken down into two components, which are the gains from exchange and the gains from specialization.
3.6 Trade based on differences in tastes
3.6A Illustration of trade based on differences in tastes
Chapter 4 Demand and supply, offer curves, and the terms of trade
Teaching goal and requirements:
In this chapter, students should know how to derive the demand curve for imports and the supply of exports of the traded commodity, as well as the offer curves for the two nations, and use them to determine the equilibrium volume of trade and the equilibrium relative commodity price at which trade takes place between the two nations, upon which, realize the terms of trade.
Teaching focus points:
4.2 The equilibrium-relative commodity price with trade-partial equilibrium analysis
Through a figure and by partial analysis to know how an equilibrium-relative commodity price is determined.
4.3 Offer curves
4.3A The definition of offer curves
4.3B Derivation and shape of the offer curve of nation 1
4.3C Derivation and shape of the offer curve of nation 2
4.4 The equilibrium-relative commodity price with trade-general equilibrium analysis
The intersection of the offer curves of the two nations defines the equilibrium-relative commodity price at which trade takes place between them.
4.5 Relationship between general and partial equilibrium analyses
Understanding the figure illustrating equilibrium for the two nations with demand and supply curves and thus showing the relationship between the general equilibrium analysis and the partial equilibrium analysis
4.6 The terms of trade
4.6A Definition and measurement of the terms of trade
1) The definition of the terms of trade, the measurement of it, the meaning of an improvement in a nation’s terms of trade
2) The illustration of the terms of trade: let terms of nation A=Px/Py, then the terms of nation B=Py/Px. Generally, when the terms of one nation are better, the terms of its counterpart will be worse.
Chapter 5 Factor endowments and the Heckscher-Ohlin theory
Teaching goal and requirements:
In this chapter, students should know the basis of comparative advantage, that is, the reason for the difference in the relative commodity prices and comparative advantage between the two nations. Then students should realize the effect that international trade has on the earnings of factors of production in the two trading nations.
Teaching focus points:
5.2 Assumptions of the trade
5.2A The assumptions
5.2B Meaning of the assumptions
5.3 Factor intensity, factor abundance, and the shape of the production frontier
5.3A Factor intensity
Factor intensity is a relative, not an absolute concept.
5.3B Factor abundance
1) Two measures to define factor abundance, 2) The difference of the two measures.
5.3C Factor abundance and the shape of the production frontier
5.4 Factor endowments and the Heckscher-Ohlin theory
5.4A The Heckscher-Ohlin theory
1) The statement of the Heckscher-Ohlin theory, 2) factor endowments is the basic cause or determinant of comparative advantage and international trade, 3) how to specialize each’ production
5.4B General equilibrium framework of the Heckscher-Ohlin theory
How is decided the commodity prices?
5.4C Illustration of the Heckscher-Ohlin
Cores of this section are 1) the shape of the same price line and the reasons for such line, 2) the position of the community indifference curve and the reasons for such a position.
5.5 Factor-price equalization and income distribution
5.5A The factor-price equalization theorem
1) The definition of the factor-price equalization (H-O-S) theorem and its meaning, 2) Conclusion: international trade causes w to rise in Nation 1 (the low-wage nation), and to fall in Nation 2 (the high-wage nation). Similarly, international trade causes r to fall in Nation 1 (the k-expensive nation) ant to rise in Nation 2 (the k-cheap nation).
5.5B Relative and absolute factor-price equalization
1) How the relative factor prices are equalized by trade in the two nations, 2) the meaning of equalization of absolute factor prices. 3) trade acts as a substitute for the international mobility of factors of production in its effect on factor prices.
5.5C Effect of trade on the distribution of income
In developed nations, capital is the relatively abundant factor, international trade tends to reduce the real income of labor and increase the real income of owners of capital.
5.5D The specific-factors model
1) Which is specific factor? 2) The features of the specific factor, 3) The changes of the mobile factor.
Discuss figure 5.9 in the appendix.
5.6 Empirical tests of the Heckscher-Ohlin model
5.6A Empirical results-the Leontief paradox
1) The content of the Leontief paradox, 2) Leontief’s explanations
5.6B Explanations of the Leontief paradox
1) Two-factor model and its shortcoming, 2) U.S. tariff policy, 3) human capital, 4)influence of research and development on U.S. exports
5.6C Factor-intensive reversal
1) The concept of the factor-intensive reversal, we can use the figure 5.10 in the appendix to explain such phenomenon. 2) Elasticity of substitution of factors can explain when and why factor-intensive occurs. 3) The result of factor-intensive reversal.
Chapter 6 Economies of scale, imperfect competition, and international trade
Teaching goal and requirements:
In this chapter, students should know the effect of relaxing the assumptions on which the H-O theory rests, pointing to the need for new trade theories, which includes international trade based on economies of scale, imperfect competition as the basis of a great deal of today's international trade, models that base international trade on differences in dynamic changes in technology among nations and a synthesis of trade theories.
Teaching focus points:
6.3 Economies of scale and international trade
Heckscher-Ohlin model can not explain trade based on increasing returns to scale in the two nations.
1) The concept of increasing returns to scale, 2) External economics, 3) Illustration of the increasing returns.
6.4 Imperfect competition and international trade
6.4A Trade based on product differentiation
1) Explanation of the differentiated products, 2) Explanation of the intra-industry trade, 3) With trade, all countries can take advantage of economics of scale to the same extent, 4) It is possible for all factors to gain with intra-industry trade based on economies of scale. 4) Intra-industry trade is related to the sharp increase in international trade in parts and components of a product.
6.4B Measuring intra-industry trade
Intra-industry trade index (T)
6.4C Formal model of intra-industry trade
1) The figure presenting the formal model of intra-industry trade, 2) Explanation of the model, 3) The relationship between inter-industry and intra-industry trade
6.5 Trade based on dynamic technological differences
6.5A Technological gap and product cycle models
1) The content of technological gap model, 2) The content of product cycle model, 3) The changes of trade in these models
6.5B Illustration of the product cycle model
The five stages of the product cycle model
Chapter 7 Economic growth and international trade
Teaching goal and requirements:
In this chapter, students should know the effect of a change in factor endowments on the nation's production frontier and examine the Rybczynski theorem, and can extend analysis to the more complex case of the large nation, and know how the immiserizing growth occurs.
Teaching focus points:
7.2 Growth of factors of production
7.2A Labor growth and capital accumulation over time
7.2B The Rybczynski theorem
Definition of the Rybczynski theorem, its explanation
7.5 Growth and trade: the large-country case
7.5A Growth and the nation’s terms of trade and welfare
1) The definition of the terms-of-trade effect, 2) The definition of wealth effect, 3) The result of the terms-of-trade and wealth effect, 4) Illustration of the wealth effect
7.5B Immiserizing growth
1) The concept of immiserizing growth, 2) How the immiserizing growth occur
Chapter 8 Trade restrictions: tariffs
Teaching goal and requirements:
In this chapter, students should know how to analyze the partial equilibrium effects and general equilibrium effects of a tariff in a country that is too small to affect world prices by its trading, understand the partial and general equilibrium effects of a large nation, which will affect the world prices by its trading, and the effective rate protection and the concept of the optimum tariff.
Teaching focus points:
8.1 Introduction
1) The ad valorem: a fixed percentage of the value of the traded commodity.
2) The specific tariff: a fixed sum per physical unit of the traded commodity.
3) The compound tariff: a combination of an ad valorem and a specific tariff.
8.2 Partial equilibrium analysis of a tariff
Features of the partial equilibrium analysis of a tariff: 1) the analysis is most appropriate to a small nation; 2) the tariff will affect neither world prices nor the rest of the economy.
8.2A partial equilibrium effects of a tariff
1) Understand how the consumption and production quantities having changed after the tariff being imposed on the imports of commodity (with the help of figure). 2) Understand how elastic affecting respectively the consumption and production effects.
8.2B Effect of a tariff on consumer and producer surplus
1) The effect of a tariff is reduction in consumer surplus and an increase in producer surplus, 2) These must be understood that how the consumer surplus being reduced and the producer surplus being increased, and that how to calculate the reduction or increase of surplus (with the help of figure).
8.2C Costs and benefits of a tariff
1) What are the protection costs and where do they arise? 2) How to calculate the costs? 3) How to calculate the net benefit of the tariff?
8.3 The theory of tariff structure
8.3A The rate of effective protection
1) The rate of effective protection: being calculated on the domestic value added, or processing, that takes place in the nation, 2) The nominal tariff rate: being calculated on the value of the final commodity, 3) The domestic value added: equaling the price of the final commodity minus the cost of the imported inputs going into the production of the commodity, 4) Why is the nominal tariff rate important to consumers and the effective tariff rate is important to producers? 5) The formula calculating the rate of effective protection.
8.3B Generalization and evaluation of the theory of effective protection
1) The conclusions on the relationship between the rate of effective protection and the nominal tariff rate on the final commodity, 2) The feature of the nominal tariff rate
8.4 General equilibrium analysis of a tariff in a small country
8.4A General equilibrium of a tariff in a small country
8.4B Illustration of the effects of a tariff in a small country
8.4C The Stolper-Samuelson theorem
8.6 The optimum tariff
8.6A The meaning of the concept of optimum tariff and retaliation
The definition of the optimum tariff
Chapter 9 Nontariff trade barriers and the new protectionism
Teaching goal and requirements:
In this chapter, students should know the effects of an import quota and compares them to those of an import tariff, and know how to deal with other non-tariff trade barriers including voluntary export restraints and other regulations, as well as trade barriers resulting from international cartels, dumping, and export subsidies.
Teaching focus points:
9.2 Import quotas
The conception of the quotas: export quotas and import quotas
9.2A Effects of an import quota
1) Summary of the effects of and import quotas, 2) to explain the partial equilibrium effects of an import quota with figure
9.2B Comparison of an import to an import tariff
Keys are three differences between an import quota and an import tariff.
9.3 Other nontariff barriers and the new protectionism
9.3A Voluntary export restraints
1) The meaning of the voluntary export restraints, 2) its effects
9.3B Technical, administrative, and other regulations
This is enough to know the existing of such regulations.
9.3C International cartels
The concept of international cartel, its shortcomings
9.3D Dumping
1) The definition of dumping, its three kinds, 2) how to deal with the dumping
9.3E Export subsides
1) The definition of export subsides, 2) the effects of export subsides, to explain with a figure, 3) simple comment
9.4 The political economy of protectionism
9.4A Fallacious and questionable arguments for protection
That is enough to give a brief comment on the four arguments.
9.4B The infant-industry and other qualified arguments
1) The arguments of infant-industry, 2) how to protect infant-industry: ★in developing countries; ★in a proper industry; ★to commodities and ★other type of domestic distortion.
9.4C Who gets protected?
The conclusions the textbook hasgot.
9.5 Strategic trade and industrial policies
9.5A Strategic trade policy
1) The content of the strategic trade, 2) its simple comment, 3) its shortcomings
Chapter 10 Economic integration: customs unions and free trade areas
Teaching goal and requirements:
In this chapter, students should know economic integration in general and customs unions in particular, know that the degree of economic integration ranges from preferential trade arrangements to free trade areas, customs unions, common markets, and economic unions. Students should realize that the theory of economic integration refers to the commercial policy of discriminatively reducing or eliminating trade barriers only among the nations joining together.
Teaching focus points:
10.1 Introduction
The definitions of preferential trade arrangements, free trade area, custom union, common market and economic union
10.2 Trade-creating customs unions
10.2A trade creation
1) The definition of trade creation, 2) why a trade-creating custom union increases the welfare of nonmembers
10.2B Illustration of a trade-creating customs union
Using a figure to illustrate the trade creation
10.3 Trade-diverting customs union
10.3A Trade diversion
1) Definition of trade diversion, 2) simple comment about trade diversion
10.3B Illustration of a trade-diversion customs union
Using a figure to illustrate the trade diversion
10.4 The theory of the second best and other static welfare effects of customs unions
10.4B Conditions more likely to lead to increased welfare
Simply explain the 6 conditions that may lead to increased welfare
10.4C Other static welfare effects of customs unions
Simply explain other three static welfare effects of customs unions
10.5 Dynamic benefits from customs unions
Simply explain four dynamic benefits from customs unions: 1) increased competition,
2) economies of scale,
3) stimulus to investment,
4) a common market in itself
Chapter 11 International trade and economic development
Teaching goal and requirements:
In this chapter, students should understand the terms of trade and economic development, specially the various terms of trade, and the contents of import substitution and export orientation.
Teaching focus points:
11.3 The terms of trade and economic development
11.3A The various terms of trade
Explain these terms of trade: 1) commodity or net barter terms of trade,
2) income terms of trade,
3) single factorial terms of trade, and 4) double factorial terms of trade.
11.3B Alleged reasons for deterioration in the commodity terms of trade
1) The concept of deterioration of the commodity terms of trade,
2) detail analysis about the deterioration.
11.5 Import substitution versus export orientation
11.5A Development through import substitution versus exports
1) The 5 conditions for industrialization,
2) The concept of the export orientation: developing countries use their cheap labor to produce primary products being abundant in their countries in order to make foreign exchange. With foreign exchange developing countries can import manufactured goods. Through export primary products, developing countries can fully utilize their natural resources, expand employment, increase average incomes, change economical structure and promote development of economy.
3) The import substitution: through establishing and developing their own manufacturing and other industries, developing countries substitute exported goods with their own products, thus the economical growth can be spurred on, industrialization can be realized,
4) The advantages and disadvantages of import-substitution industrialization and export-oriented industrialization.
Chapter 12 International resource movements and multinational corporations
Teaching goal and requirements:
In this chapter, students should know the types of foreign investments, the motives for portfolio and direct investments, the welfare effects of international capital flows on investing and host countries, should realize the reasons for the existence and some problems that multinational corporations create, and the welfare effects of international migration of labor in general and of skilled labor in particular.
Teaching focus points:
12.1 Introduction
Two main types of foreign investments: portfolio investments and direct investment
12.3 Motives for international capital flows
12.3A Motives for international portfolio investments
1) The basic motive for international portfolio investments is to earn higher returns abroad; 2) the reasons for two-way capital; 3) portfolio theory
12.3B Motives for direct foreign investments
1) Horizontal integration; 2) vertical integration; 3) other reasons for direct foreign investments; 4) another explain about the two-way direct foreign investments
12.4Welfare effects of international capital flows
12.4A Effects on the investing and host countries
The key of this part is the graphical analysis of the welfare effects.
12.4B Other effects on the investing and host countries
1) Redistribution of domestic income from labor to capital and from capital to labor; 2)international capital transfers affect the balance of payments of the investing and host countries; 3) different rates of taxation and foreign earnings in various countries may affect the welfare effect of foreign investments on both investing and host countries
12.5 Multinational corporations
The definition of multinational corporations (MNCs)
12.5A Reasons for the existences of multinational corporations
1) MNCs have competitive advantage of a global network of production and distribution; 2) expected profits on additional investments in its industry are higher abroad; 3) MNCs are also in a much better position to control or change to their advantage the environment in which they operate than are purely national firms; 4) transfer pricing
12.5B Problems created by multinational corporations in the home country
1) The loss of domestic jobs resulting from foreign direct investment; 2) operations of MNCs can reduce tax revenues and erode the base of the home country; 3) MNCs can circumvent domestic monetary policies and make government control over the economy in the home nation more difficult.
12.5C Problems created by multinational corporations in the host country
1) Host countries allege that MNCs dominate their economics; 2) siphoning off R&D funds to the home nation; 3)
12.6 Motives for and welfare effects of international labor migration
12.6A Motives for international labor migration
1) Costs of migration; 2) the economic benefits of international migration
12.6B Welfare effects of international labor migration
Illustration of the welfare effects of international labor migration
12.6C Other welfare effects of international labor migration
The phenomenon of brain drain and the analysis of the phenomenon
Chapter 13 Balance of payments
Teaching goal and requirements:
In this chapter, students should know the meaning, function, and measurement of the balance of payments, understand the concepts of deficit and surplus in a nation’s balance of payment, and the counting principles.
Teaching focus points:
13.1 Introduction
1) The definition of the balance of payments, and clarification about the definition; 2) the concept of international transaction; 3) the resident
13.2 Balance-of-payments counting principles
13.2A Credits and debits
1) Credit transactions; 2) debit transactions; 3) capital inflows 4) capital outflows
13.2B Double-entry bookkeeping
1) The definition of the double-entry bookkeeping; 2) the experience of entering a transaction
Chapter 14 Foreign exchange markets and exchange rates
Teaching goal and requirements:
In this chapter, students should know the operation of foreign exchange markets, understand the functions of foreign exchange markets, foreign exchange rate and how they are determined under a flexible exchange rate system, arbitrage, spot and forward rates, and foreign exchange futures and options, foreign exchange risks, uncovered and uncovered interest arbitrage.
Teaching focus points:
14.1 Introduction
The definition of the foreign exchange market
14.3 Foreign exchange rates
14.3A Equilibrium foreign exchange rates
1) The definition of the equilibrium exchange rates, 2) the concepts of depreciation and appreciation of domestic currency, 3) the concept of cross exchange rate
14.3B Arbitrage
1) The definition of arbitrage, 2) the process of arbitrage; 3) the function of arbitrage
(Three-point or triangular arbitrage is omitted)
14.4 Spot and forward rates, currency swaps, futures, and options
14.4A Spot and forward rates
1) The definition of the spot rate; 2) the definition of the forward rate; 3) the content of forward discount; 4) the content of the forward premium
14.4B Currency swaps
The definition of the currency swap
14.4C Foreign exchange futures and options
1) The definition of foreign exchange futures; 2) the definition of the foreign option
14.5 Foreign exchange risks, hedging, and speculation
14.5A Foreign exchange risks
How has the foreign exchange risks generated? The content of the open position: transaction exposure, translation or accounting exposure, economic exposure.
14.5B Hedging
The concept of hedging, how to hedge, what is to be hedged? The function of hedging
14.5C Speculation
1) How to speculate in a spot market; 2) how to speculate in a forward market; 3) long position and short position; 4) stabilizing speculation and destabilizing speculation
14.6 Interest arbitrage and the efficiency of foreign exchange markets
14.6A Uncovered interest arbitrage
The content of the uncovered interest arbitrage
14.6B Covered interest arbitrage
1) The definition of the covered interest arbitrage; 2) covered interest arbitrage parity
14.6C Covered interest arbitrage parity
To illustrate the relationship, with a figure and through covered interest arbitrage, between the interest rate differentials between two nations and the forward discount or premium on the foreign monetary.
Chapter 15 Exchange rate determination
Teaching goal and requirements:
In this chatter, students should know and grasp the PPP theory, the monetary approach to the balance of payments and exchange rates, the asset market model, the exchange rate overshooting.
Teaching focus points:
15.2 Purchasing-power parity theory
15.2A Absolute purchasing-power parity theory
1) The concept of absolute purchasing-power parity; 2) the law of one price 3) Why is the version of PPP theory very misleading?
15.2B Relative purchasing-power parity theory
1) The concept of relative purchasing-power parity; 2) some difficulties that remain with the relative PPP theory
15.3 Monetary approach to the balance of payments and exchange rates
15.3A Monetary approach under fixed exchange rates
15.3B Monetary approach under flexible exchange rates
Chapter 16 The price adjustment mechanism with flexible and fixed exchange rates
Teaching goal and requirements:
In this chapter, students should know how a nation’s current account is affected by price changes under flexible and fixed exchange rate system; know why the traditional exchange rate model is called trade or elasticity approach, why the current account usually responds with time lag and only partially to a change in the nation’s exchange rate.
Teaching focus points:
16.2 Adjustment with flexible exchange rates
The concept of devaluation
16.2A Balance-of-payments adjustments with exchange rate exchanges
Using the figure16.1 to explain the adjustment with flexible exchange rates, especially the elasticity of the demand and supply curves
16.3 Effect of exchange rate changes on domestic prices and the terms of trade
1) Impact on economy of the exchange rate changes, for example, the devaluation; 2) impact on the nation’s terms of trade of devaluation
16.4 Stability of foreign exchange markets
The meaning of the stable and unstable foreign exchange markets
16.4A Stable and unstable foreign exchange markets
Illustration of the stable and unstable foreign exchange markets (three figures)
16.4B The Marshall-Lerner condition
It is enough to understand three circumstances of the Marshall-Lerner condition.
16.5 Elasticities in the real world
16.5B The J-Curve effect and revised elasticity estimates
The meaning of the J-Curve
Chapter 17 The income adjustment mechanism and synthesis of automatic adjustment
Teaching goal and requirements:
In this chapter, students should know the operation of the automatic income adjustment mechanism, income determination in a closed economy and in a small open economy. Students should grasp the absorption approach, the monetary adjustments and synthesis of the automatic adjustments.
Teaching focus points:
17.1 Introduction
The special assumptions of the chapter
17.2 Income determination in a closed economy
17.2A Determination of the equilibrium national income in a closed economy
1) All equations and functions about the determination of the equilibrium national income in a closed economy; 2) the figure about the determination of the equilibrium national income in a closed economy
17.2B Multiplier in a closed economy
17.3 Income determination in a small open economy
17.3A Import function
The import function and MPM, APM and nY
17.3B Determination of the equilibrium national income in a small open economy
17.3C Graphical determination of the equilibrium national income
17.3D Foreign trade multiplier
17.5 Absorption approach
1) Comparing with the elasticity approach, the reasons of the absorption approach; 2) the content of the absorption approach
17.6 Monetary adjustments and synthesis of the automatic adjustments
17.6A Monetary adjustments
17.6B Synthesis of automatic adjustments
Chapter 18 Open-economy macroeconomics: adjustment policies
Teaching goal and requirements:
In this chapter, students should understand the adjustment policies that are used to achieve full employment with price stability and equilibrium in the balance of payments, know the internal and external balance with expenditure-changing and expenditure-switching policies, the equilibrium in the goods market, in the money market, and in the balance of payments. Students should also understand the fiscal and monetary policies from external balance and unemployment.
Teaching focus points:
18.1 Introduction
1) The most important economic goals of nations; 2) the definitions of internal balance and external balance; 3) the policy instruments that to achieve nation’s goals: expenditure-changing policies, expenditure-switching policies, and direct control; 4) the nation must decide which policy to utilize to achieve each of its objectives
18.2 Internal and external balance with expenditure-changing and expenditure-switching policies
Understanding the details of the Swan Diagram
18.3 Equilibrium in the goods market, in the money market, and in the balance of payments
1) Three curves and their meanings; 2) how to use these curves to achieve both internal and external balance
18.4 Fiscal and monetary policies for internal and external balance with fixed exchange rates
18.4A Fiscal and monetary policies from external balance and unemployment
Understanding the explanation of the policies with the figure, especially the change of the relative curves
18.4B Fiscal and monetary policies from external deficit and unemployment
Understanding the explanation of the policies with the figure, especially the change of the relative curves
18.4C Fiscal and monetary policies with elastic capital flows
Understanding the explanation of the policies with the figure, especially the change of the relative curves
18.4D Fiscal and monetary policies with perfect capital mobility
Understanding the explanation of the policies with the figure, especially the change of the relative curves
18.6 Policy mix and price changes
18.6A Policy mix and internal and external balance
Understanding the explanation of the policy mix with the figure, especially how using different policy mix in different circumstance
18.7 Direct control
Many contents have been introduced in other chapters, so here what about the direct controls can be summarized briefly.
18.7A Trade controls
18.7B Exchange controls
18.7C Other direct controls and international cooperation
