International economics is the branch of economics concerned with the study of individual and organizational decision-making regarding the purchase and sale of foreign goods and services, investment in foreign corporate and government stocks and bonds, and the construction of new facilities or purchase of real estate in a foreign country. Thus, from the purely theoretical viewpoint, the first step in studying international economics is to develop a model of the economy as an open system. As such the economy will interact with other economies through the exchange of goods, services, money, and information.
In this chapter the conventional economic modeling process is used to describe first a closed economy and then an open economy characterized by a more or less free flow of goods, services, people, money, and information worldwide.
LEARNING OBJECTIVES
After studying the material in this chapter, the student should be familiar with the following concepts:
- International economics
- Circular flow diagram
- Basic components of aggregate demand
- Value added
- GNP = Y = C + I + G + N
- OECD
- World Economic Outlook
- Development
- Industrial countries
- Developing countries
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