International Economics: Macroeconomic And Microeconomic Principles To International Trade

An economics field of study that applies both macroeconomic and microeconomic principles to international trade, which is the flow of trade among nations, and to international finance, which is the means of making payment for the exchange of goods among nations. International economics studies the economic interactions among the different nations that make up the global economy. Often this interaction is viewed in terms of the domestic economy and the foreign sector. The key economic principle underlying international economics is the law of comparative advantage.

International economics is growing in importance as a field of study because of the rapid integration of international economic markets. Increasingly, businesses, consumers, and governments

One is the need to exchange the currency of one nation for the currency of another. Another is the inevitable involvement of the government sector. The first topic is captured by the foreign exchange market. The second topic highlights government trade policies and the politics of protectionism.

Trade and Finance

International economics is a broad field of study that is divided between two subfields -- international trade and international finance. Economists can and do spend their entire careers in either subfield, but usually have a keen understanding of both.

• International Trade: This is the study of the flow of goods and services among the nations of the globe. The primary focus is on how and why goods are traded, especially the identification of key principles such as the law of comparative advantage. The objective of an international trade course is to understand the effects of international trade on individuals and businesses and the effects of changes in trade policies and other economic conditions. The course develops arguments that support a free trade policy as well as arguments that support various types of protectionist policies. By the end of the course, students should better understand the centuries-old controversy between free trade and

Because international trade occurs among nations that typically use different currencies, such trade inevitably requires the exchange of currencies.

The trading of currency is captured in what is termed the foreign exchange market. When one nation buys goods produced by another it also needs a bit of the currency of the other nation to make the payment. It "buys" this currency through the foreign exchange market. However, when it "buys" the currency of another nation, it simultaneously "sells" its own currency. In other words, one currency is exchanged for another.

While international trade is a primary that nations exchange currency it is not the only reason. Currency is also exchanged when one nation investments in the physical or financial assets of another. Or when the government of one nation provides aid or assistance to another nation. Comparable to the balance of trade, an accounting of the assorted currency flows from one nation to others is termed the balance of payments.

Policies and