International Economics

Chapter 1Introduction
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Key points: the contents of international economics and the methodology
Teaching method: lecture
Outcome: Understanding the main contents and methodology, the relationships between the
international economics and other disciplines.

Part One: International Trade Theory

Chapter 2: The Law of Comparative Advantage
Contents
2.2 The Mercantilists Views on Trade
2.3 Trade Based on Absolute Advantage: Adam Smith
2.4 Trade Based on Comparative Advantage: David Ricardo
2.5 Comparative Advantage and Opportunity Costs
2.6 The Basis for the Gains from Trade Under Constant Costs
..

Key points: 3 basic questions of trade model, the difference between the Smiths absolute
advantage theory and Ricardos comparative advantage theory, the trade pattern, the formation of
international prices, and the gains distribution from trade
Teaching method: lecture
Outcome: grasp the classical trade models: basis for trade, trade pattern, exchange price and
the gains from trade.

Chapter 3: The Standard Theory of International Trade
Contents

3.2 The Production Frontier with Increasing Costs

3.3 Community Indifference Curves
3.4 Equilibrium in Isolation
3.5 The Basis for and the Gains from Trade with Increasing Costs

Key points: the production possibility frontier under increasing opportunity cost,
community indifference curve. The basis for trade, trade pattern, gains from trade under increasing
opportunity cost. The formation of equilibrium relative commodity price in isolation and common
equilibrium relative commodity price.

Teaching method: lecture

Outcome: grasp the trade theory under increasing opportunity cost. How comparative
advantage, specialization, trade pattern, equilibrium price formation and the welfare distribution.

Chapter 4: Demand and Supply, Offer Curves and the Terms of Trade
Contents
4.2 The Equilibrium-Relative Commodity Price with Trade-Partial Equilibrium Analysis

4.3 Offer Curves

4.4 The Equilibrium-Relative Commodity Price with Trade-General Equilibrium Analysis

4.5 Relationship between General and Partial Equilibrium Analyses

4.6 The Terms of Trade

Key pointsreciprocal demand, derivation of offer curve, The Equilibrium-Relative

Commodity Price with Trade-Partial Equilibrium AnalysisThe Equilibrium-Relative Commodity
Price with Trade-General Equilibrium Analysis

Teaching method: lecture

Outcome: grasp reciprocal demand theory, derivation of offer curve,
Equilibrium-Relative Commodity Price analysis

Chapter 5: Factor Endowments and the Heckscher-Ohlin Theory
Contents
5.2 Assumptions of the Theory
5.3 Factor Intensity, Factor Abundance, and the Shape of the Production Frontier

1.4 Factor Endowments and the Heckscher-Ohlin Theory

5.5 Factor-Price Equalization and Income Distribution

5.6 Empirical Tests of the Heckscher-Ohlin Model
:

H-O

Key points: Factor Intensity, Factor Abundance, and the Shape of the Production Frontier,
Factor Endowments and the Heckscher-Ohlin Theory, Explanations of the Leontief Paradox

Teaching method: lecture

Outcome: grasp

factor Intensity, factor Abundance, and the shape of the production

frontier, factor endowments and the heckscher-ohlin theory. Understand the emprirical
approach of H-O model and explanations of the Leontief paradox

Chapter 6 Economies of Scale, Imperfect Competition, and International
Trade
Contents
6.2 The H-O Model and New Trade Theories -
6.3 Economies of Scale and International Trade
6.4 Imperfect Competition and International Trade
6.5 Trade Based on Dynamic Technological Differences
6.6 Transportation Costs, Environmental Standards, and International Trade

Key points: Internal economy of scale, external economy of scale, imperfect

competition and trade, intra-trade, product cycle and comparative advantage
Teaching method: Lecture
Outcome: grasp the contents of the new trade models, understand the differences
between the new trade theory and the classical trade theory, and H-O model;
understand the strategic trade policy.


Chapter 7: Tariffs
Contents
7.2 Partial Equilibrium Analysis of a Tariff in Small Country
7.3 The Theory of Tariff Structure
7.4 General Equilibrium Analysis of a Tariff in a Small Country

7.5 General Equilibrium Analysis of a Tariff in a Large Country

7.6 The Optimum Tariff

Key points: Partial Equilibrium Effects and general Equilibrium Effects of a Tariff for a
small open economy, cost and benefit of tariff, impacts for different interest group. Partial
Equilibrium Analysis and General Equilibrium Analysis of a Tariff for a Large Country.

Teaching method: lecture and discussion

Outcome: grasp the types of tariff, Partial Equilibrium Effects and general
Equilibrium Effects of a Tariff for a small open economy. Understand the effects of a large
economy.

Chapter 8: Nontariff Trade Barriers and the New Protectionism

Contents
8.2 Import Quotas
8.3 Other Nontariff Barriers and the New Protectionism

Key points: Comparison of an Import Quota to an Import Tariff, effects of export subsidy
Teaching method: Lecture
Outcome: grasp the effects of import quota, the difference between import quota
and equivalent-tariff, understand the form of export subsidy and effects; understand
the definition of dumping and anti-dumping, the reasons for new trade protectionism
and its main forms.
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Chapter 9 The Effects of Custom Union: Trade Creation and Trade Diversion
9.1 Trade-Creating Customs Unions
9.2 Trade-Diverting Customs Unions

Key points: statistic effects of Trade-Creating Customs Unions and Trade-Diverting

Customs Unions

Teaching method: Lecture and Discussion

Outcome: grasp the static effects of Trade-Creating Customs Unions and
Trade-Diverting Customs Unions in a small economy

Chapter 10: International Resource Movements: Capital, Labor
Contents
10.2 Welfare Effects of International Capital Flows

10.3 Motives for and Welfare Effects of International Labor Migration

Key points: welfare effects of international resources movement

Teaching method: lecture and discussion
Outcome: grasp the static effects of international capital movement and
international labor movement

Part II Open Macroeconomics

Chapter 11 Balance of Payments and the Adjustment of BOP Disequilibrium
11.1 Balance of payments and BOP Presentation
11.2 Equilibrium and Disequilibrium
11.3 Disequilibrium and Its Impacts on Macro economy
11.4 Price Specie-Flow Mechanism (an automatic price mechanism for adjustment)

11.5Elasticity Approach to the Balance of Trade

11.6Absorption Approach
11.7 Monetary Approach to the Balance of Payments (MABP)
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Key points: Double Entry booking, the nature of surplus and deficit Marshall-Lerner
condition, J curve effects and the monetary approach to the BOP
Teaching method: lecture
Outcome: build the capability of understanding the relations between BOP and
national income. Analyzing BOP statement, Disequilibrium of BOP and its impacts on
Macro economy, Elasticity Approach to the Balance of Trade, Absorption Approach. Understand
Monetary Approach to the Balance of Payments (MABP).

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Chapter 12 The Foreign Exchange Market and Theories of Exchange Rate
Determination
12.2Functions of the foreign exchange markets
12.3Foreign exchange rate quotations

12.4Arbitrage
12.5The equilibrium exchange rate
12.6 The factors which affect the equilibrium exchange rate
12.7Central bank intervention
12.8Black markets and Parallel markets
12.9Purchasing-Power Parity Theory
12.10 Interest Parity
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Key points: Foreign exchange rate quotationsArbitragethe means of Central bank

intervention and its effects. Purchasing power parity, interest rate parity

Teaching method: lecture

Outcome: grasp the foreign exchange market structure, arbitrage mechanism, the rationale
for central banks intervention in the foreign exchange market, absolute PPP and relative PPP, the
covered interest parity and uncovered interest parity

Chapter 13 Macroeconomic Equilibrium under Fixed Exchange Rate Regime
13.1 income and interest rate :BP curve
13.2 The effectiveness of fiscal policy under fixed rate regime with different capital mobility

13.3 The effectiveness of monetary policy under fixed rate regime with different capital
mobility

BP BP

BP

Key points: the derivation of BP curve shapes of BP curve under different

capital mobility. The effectiveness of fiscal policy and monetary policy
Teaching method: lecture
Outcome: grasp the economic implication of BOP. The shapes of BP curve

under different capital mobility, the effectiveness of fiscal and monetary policy with
perfect capital immobility and perfect capital mobility

Chapter14 Macroeconomic Equilibrium under Flexible Exchange Rate
Regime
14.1 The effectiveness of fiscal and monetary policy under flexible rate regime with perfect
capital immobility
14.2 The effectiveness of fiscal and monetary policy under flexible rate regime with perfect
capital mobility

Key points: The effectiveness of fiscal and monetary policy under flexible rate regime
with perfect capital immobility and perfect capital mobility

Teaching method: lecture

Outcome: grasp the effectiveness of fiscal and monetary policy under flexible rate regime
with perfect capital immobility and perfect capital mobility; understand the choice of
macroeconomic policy in open economy

Chapter 15 International Monetary System
15.1 The gold standard period
15.2The Bretton Woods System
15.3 Operation of Present System
15.4 The Current International Monetary System Reform

Key points: the main features of the gold standard system and The Bretton Woods
System, the reason for the collapse of Bretton Woods System; different BOP adjustment
mechanism under different systems .

Teaching method: lecture

Outcome: grasp the main features of the gold standard system and The Bretton Woods
System, the reason for the collapse of Bretton Woods System; understand the different BOP
adjusting mechanism under different system, the main problems with the present international
monetary system.