The Global Economy : International Economics - Digital resource book
The Global economy: international economics
UNIT 1: The global economy and benefits of international trade Foreword by Brad Cartwright .................................................................................1 international economics & free trade: Key Terms and Concepts .......2 REAL WORLD ISSUE: Who are the winner and losers of the integrations of the world's economies? .........................................................................................................3-6 Lesson 1: Introduction to Gains from Free Trade...................................................... 7-9 Lesson 2: Comparative Advantage Theory..............................................................10-13 Lesson 3: The World Trade Organization (WTO).....................................................14-16 Review Questions ..................................................................................................17 IB Exam Practice Questions .............................................................................18
The Global economy: international economics
UNIT 2: Free trade and protectionism free trade and protectionism: Key Terms and Concepts ..........................19 Lesson 1: Arguments for Protectionism...................................................................20-24 Lesson 2: Arguments for Free Trade (Against Protectionism)................................25-26 Lesson 3: The Free Trade Diagram..........................................................................27-29 Lesson 4: The Protectionist Tariff Diagram.............................................................30-32 Lesson 5: The Protectionist Subsidy Diagram.........................................................33-35 Lesson 6: The Protectionist Quota Diagram ..........................................................36-38 Lesson 7: Administrative Barriers to Free Trade.....................................................39-40 Review Questions ...................................................................................................41 IB Exam Practice Questions .............................................................................42
The Global economy: international economics
UNIT 3: exchange rates exchange rates: Key Terms and Concepts .........................................................43 Lesson 1: The Exchange Rate Diagram..................................................................44-47 Lesson 2: The Fixed Exchange Rate System.........................................................48-53 Lesson 3: The Floating Exchange Rate System....................................................54-60 Lesson 4: Impact of an Increase in Demand of a Currency ................................61-63 Lesson 5: Impact of an Increase in Supply of a Currency....................................64-66 Lesson 6: Managed Exchange Rates....................................................................67-68 Lesson 7: Strong Exchange Rates ........................................................................69-71 Lesson 8: Weak Exchange Rates .........................................................................72-74 Lesson 9: Government Measures to Intervene in the Currency Market...........75-78 Review Questions ...............................................................................................79 IB Exam Practice Questions .........................................................................80
The Global economy: international economics
UNIT 4: balance of payments balance of payments: Key Terms and Concepts ................................................81 Lesson 1: Preview - A Visual Understanding of Balance of Payments....................82-83 Lesson 2: The Current Account..............................................................................84-87 Lesson 3: The Financial Account ...........................................................................88-92 Lesson 4: The Reserve Assets ................................................................................93-95 Lesson 5: Relationship Between Balance of Payments and Exchange Rate.........96-98 Review Questions .................................................................................................99 IB Exam Practice Questions .........................................................................100
The Global economy: international economics
UNIT 5: economic integration Economic integration: Key Terms and Concepts ..........................................101 Lesson 1: Six Stages of Economic Integration......................................................102-107 Review Questions ................................................................................................108 IB Exam Practice Questions ...........................................................................109 Sources ......................................................................................................................110
- sample lesson -
arguments for protectionism why governments protect their economies
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arguments for protectionism • arguments for protectionism rest on two main points – why is it that countries do not trade freely if it is good for all countries involved? – why is it that countries often protect their economies from imports?
• the arguments for protectionism 1. 2. 3. 4. 5. 6. 7. 8. 9.
protecting domestic employment protecting the economy from low-cost labor protecting an infant (sunrise) industry avoid the risks of over-specialization strategic reasons prevent dumping protect product standards raise government revenue correct a balance of payments deficit source: jocelyn blink
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arguments for protectionism • protecting domestic employment – industries that are in decline because they cannot compete with foreign competition—sunset industries – judgment (evaluation) of argument…
• protecting the economy from low-cost labor – lower cost of labor in exporting countries and the economy should be protected – judgment (evaluation) of argument…
• protecting an infant (sunrise) industry – an industry that is just developing may not have the economies of scale advantages that larger industries in other countries may enjoy – judgment (evaluation) of argument… source: jocelyn blink
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arguments for protectionism • to avoid the risks of over-specialization – governments may want to limit overspecialization – judgment (evaluation) of argument…
• strategic reasons – certain industries need to be protected in case they are needed at times of war, for example, agriculture, steel, or electricity – judgment (evaluation) of argument…
• to prevent dumping – definition: dumping is the selling of large quantities of a commodity by one country, at a lower price than its production costs, in another country – judgment (evaluation) of argument…
source: jocelyn blink
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arguments for protectionism • to protect product standards – to impose safety, health, or environmental standards on goods being imported into its domestic market – judgment (evaluation) of argument…
• to raise government revenue – in many developing countries, it is difficult to collect taxes and so government impose import taxes or tariffs on products in order to raise revenue – judgment (evaluation) of argument…
• to correct a balance of payments deficit – governments sometimes impose protectionist measures to attempt to reduce import expenditure and thus improve a current account deficit judgment (evaluation) of argument…
source: jocelyn blink
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- SAMPLE LESSON -
the protectionist tariff diagram 12
the free trade diagram 13
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Free Trade and Protectionism Review Questions: What you should be able to do!
and unfair competition, a means of overcoming a balance of payments deficit and a source of government revenue. Discuss the arguments for free trade, including a misallocation of reso rces the danger of retaliation and trade ars the
Types of Trade Protection Define protective tariff. Using a diagram, explain the effects of imposing a tariff on imported goods
potential for corruption, increased costs of production due to lack of competition, higher prices for domestic consumers, increased costs of imported factors of production and reduced export competitiveness.
on different stakeholders, including domestic producers, foreign producers, consumers and the government. Define protective subsidy.
Adopted from the IB Economics Subject Guide
Using a diagram, explain the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers and the government. Define protective quota. Using a diagram, explain the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers and the government. Describe administrative barriers that may be used as a means of protection. Evaluate the effect of different types of trade protection. Arguments For and Against Free Trade and Protectionism Discuss the arguments in favor of trade protection, including the protection of domestic jobs, national security, protection of infant industries, the maintenance of health, safety and environmental standards, anti-dumping
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Free Trade and Protectionsim IB Exam Practice Questions Paper 1 & 2
Paper 1 & 2: Analysis Questions 1. Using a diagram, illustrate the impact of protective tariff on the market for corn. 2. Using a diagram, illustrate the impact of protective subsidy on the market for wheat. 3. Using a diagram, illustrate the impact of protective quota on the market for barley. 4. Explain two arguments for protectionism.
Paper 1 & 2: Evaluation Questions 1. Evaluate the impact of a protective tariff on domestic producers of corn in the United States. 2. Evaluate the impact on world producers of wheat if France imposes a protective subsidy in the wheat market. 3. Evaluate the impact of a protective quota on domestic producers of barley in the United States.
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Sources I am grateful for the work of my fellow IB Economics teachers Jocelyn Blink, Ian Dorton, Ellie Tragekes, and Jason Welker. Though they may not know it, each of them have accompanied me through my teaching of IB Economics over the years. Thank you!
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