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International Economy - Coggle Diagram
International Economy
International trade economic policy and its effects on economic well-being and growth.
Free trade vs. Protectionism
free trade, a situation in which there is free movement of goods and services between countries without any obstacles.
it aims to protect an industry that is considered strategic to national security.
These provisions are made to promote industrialization.
The commercial policy of a country must obey a long-term strategy.
Developed countries have the protection of their markets under hygiene reasons.
Exchange regimes and markets.
commercial banking as a retailer of foreign currency.
Exchange rate systems A set of rules that describe the role that the central bank will play.
Central Bank does not intervene in the exchange market.
The arbitrage operation: involves buying a foreign currency.
The arbitration is carried out with currencies, metals, titles, bonds and any other type of negotiable securities.
currency buyer when the offer is free .
The exchange market is made up of: the Central Bank as a wholesale buyer and seller of foreign exchange.
Economic models of international trade
Based on private property and the use of markets
objective
maximize the interest of the sovereign state.
Strengthen the structure of the nascent national state.
Adam Smith
father of economics
he attacked the mercantilist system through the doctrine of laissez - faire.
the division of labor creates a society of exchanges.
exchanges are based on selfishness and not benevolence.
the selfish society promotes well-being.
money improves the functioning of commercial society
individual power in the market society is measured by the purchasing power of personal wealth.
The David Ricardo model
published his "Essay on the Influence of the Low Price of Wheat on the Profits of Capital"
states that the only cause of change in the exchange value of a commodity is an increase or decrease.
"the degree of alteration of the relative value of the goods caused by an increase or reduction of the work will depend on the global capital used as fixed capital"
Instruments of international trade policy and their effects on economic well-being.
Theory of tariffs.
are used to earn government revenue or protect domestic industry.
The theory of Partial Equilibrium studies the mechanisms by which the equilibrium quantity and price are determined in a market.
The theory of General Equilibrium: studies the necessary conditions for all markets to be simultaneously in equilibrium.
Subsidies
they involve transfers from the private sector to the public sector of the economy.
They are granted to rural producers, to avoid migration to the cities.
Optimal Tariff: it allows the country that imposes it to reach the curve of social indifference furthest from the origin.