Tamilnadu Samacheer Kalvi 12th Economics Notes Chapter 7 International Economics Notes

→ International Economics is a valuable branch of Economics dealing with how trade benefits nations Several theories have been propounded on causes of international trade starting from Adam Smith.

→ The controversy over the need for a separate theory has been resolved by the Modem Theory of International Trade.

→ The gains from trade, Terms of Trade, Balance of Payments constitute the major areas of discussion.

→ The Exchange rate, either fixed or flexible is a major factor determining the economic strength of the nation.

→ In the line of foreign trade and foreign capital, foreign investment (especially FDI) plays a major role in determining economic development of Less Developed Countries and developing countries.

→ International trade has helped the economically developed countries largely and disappointed many african and asian countries.

→ The international economic organizations such as IMF. IBRD and WTO and the trade blocs SAARC, ASEAN and BRICS which play a vital role in international trade are covered in the next chapter.

→ Absolute Cost Differences : The difference in the actual costs of production of a commodity between two nations.

→ Balance of Payments : The balance between the values of goods and services exchanged between two countries. It is a trade in both visible and non-visible items.

→ Balance of Trade : The balance between the values of goods exchanged between two countries. It is a trade in merchandise items or visible items only.

→ Comparative Cost Differences : The difference in the absolute costs of production of two commodities between two countries.

→ Devaluation: It means official reduction in the value of a currency in terms of gold or other currencies.

→ Exchange Rate: The rate at which one currency is exchanged for another currency.

→ Factor Endowment: Abundance in the availability of a factor in a country.

→ Fixed Exchange Rates: An exchange rate that is held within a narrow band by the monetary authorities.

→ Flexible Exchange Rates: Flexible exchange rates are freely determined in an open market primarily by private dealings, and they, like other market prices, vary from day by day.

→ Foreign Direct Investment: The investment made by a multinational enterprise in a foreign country and an investment in a foreign country that involves some degree of control and participation in management.

→ Foreign Exchange: The currency of another country.

→ Internal Trade: A trade within the geographical boundary of a particular nation.

→ International Economics : A special branch of Economics which primarily deals with the basics of international trade.

→ International Trade : A trade between two or more countries and it is a trade beyond the geographical and political boundaries.

→ Terms of Trade : The rate at which goods of one country are exchanged for that of another country ie ratio of export price and import price.

Samacheer Kalvi 12th Economics Notes