THE SCOPE OF INTERNATIONAL ECONOMICS TRADE

THE SCOPE OF INTERNATIONAL ECONOMICS TRADE

While general economics theory deals with the problem of single, close economy- international economics deals with the problem of two or more open economics. In particular, international economics deals with the same economic problem as those studied by their international setting. Thus, international economics studies how a number distinct economics interact upon each other in the process of allocating scarce resources to satisfy human wants. Clearly, international economics is more general than the economics of a closed economy. The latter being a special case of international economic where the number of trading countries has been reduced to me. Future, the study of general economic theory dealing with the problem of a closed economy is only first (but necessary) step toward the study of the behavior of a real economy, because there is actually no economy except the world economy.Parallel to the division of economic theory into microeconomics and macroeconomics is the breakdown of international economics and branches; international trade theory (or the pure theory of trade) and international monetary economics. The latter is centered upon the monetary aspects of international monetary relations. It’s approach is mainly macroeconomic in nature , and it particularly deals with the short-run problem of balance-of-payments disequilibrium and adjustment.The subject matter of this book is the pure theory of trade, which, in contrast to international monetary economics, is a long-run, static-equilibrium theory of barter. Here the short-run monetary adjustment process is assumed completed, with money having no influence whatsoever on the nature or position of long-run equilibrium. Its approach is basically microeconomics in nature. Like microeconomics, the pure theory of trade can be divided into two main branches: one branch dealing with problem of positive economics and the other dealing problem of welfare economics. Thus, the analysis of the effect of tee trade on domestic consumption, production, commodity prices, factor rewards, and so on, belongs to what right be called international positive economics. On the other hand, the question of whether free trade is better than restricted or no trade is clearly an issue which belongs to the realm of (international) welfare economics.