HNDEconomics2TheWorldEconomy世界经济学报告.doc

World EconomyEconomics 2: The WorldEconomyReworkContentIntroduction 3Section 1: International TradeThree gains from trading internationally 3Free Trade 3Absolute and Comparative Advantage 3Protectionism 4Barriers to trade 4WTO and EU 5Section 2: International FinanceBala nee of Payme nts and Gen eral trends in UK Trade 6Relatio nship betwee n the excha nge rate and the bala nee of payme—tsi4Sin gle Currency 15Effects on in dividuals and bus in ess of the Euro 15Section 3: Less Developed Countries (LDCs)Characteristics of a LDC 16Curre nt issues that face LDCs 16The impacts of multi nati on als on LDCs and NICs 16Conclusion- 16References 17Introduction:As a member of the government of nation on the periphery of Europe, it is my obligati on to illustrate the ben efits of joi ning the EU to the Premier. I n this report, I will an alyze 15eleme nts in n ext three parts to make a clear expla natio n of ben efits of joining the EU.Section 1: International TradeThree gains from trading internationally:To beg in with, the intern ati onal trade could in crease world out-put. The tendency of globalization brings the firms more opportunities to gain the labor, resources, con tracts and new tech no logy. The supply and dema nd will be improved with the improveme nt of compa ny'productivity.Once the supply has bee n improved, the goods and services were produced at lower cost and there are more and more competitions, the price of the product might fall which means con sumers could get more choices and cheaper goods.In additi on, the most importa nt gaining of intern atio nal trade is it can gen erate econo mic growth. Free trade could in crease sales, profit margins, and market shares and the both dema nd and supply level has updated. Mean while, the producer n eeds more resources,labor and capital to produce more to satisfy the global market. It direct result in improving the material market, finance market, and may decline the un employme nt rate.Free tradeFree trade is a concept that there is no barrier to goods and services exchanged betwee n coun tries. Since differe nt coun tries have differe nt terra in, weather, resources and tech no logy, the intern ati onal trade would bring the goods which are more valuable tha n the local people produce it by themselves.A good example for free trade is in Nov.18, 2004, Chin ese Preside nt and Chilea n Preside nt declared the start of the FTA n egotiati ons. Accord ing to the agreeme nt, the two coun tries would start tariff reduct ion of goods trade from July 1,2006. Tariff of products accounting for 97% of the total of the two countries would be zero in ten years. China and Chile would carry out free trade in educatio n, scie nee & tech no logy, environment protection, labor, social security, IPR, investment and promotion, min eral and in dustry. This agreeme nt has promoted the free trade betwee n Chi na and Chile successfully.Absolute and comparative advantageAbsolute advantage refers to the ability of a particular person or a country to produce a particular good with fewer resources than another person or country. Absolute advantage is said to occur when one country can produce a good or service to pre-determ ined quality more cheaply tha n an ther coun try. It sta nds con trasted with the con cept of comparative adva ntage which refers to the ability to produce a particular good at a lower opportunity cost. Opportunity cost is defined as the cost of choosing a good or service measured in terms of the n ext best alter native give n up. A country has a comparative adva ntage in produci ng a good if the opport unity cost of produc ing that good in term of other goods is lower in that country than it is in other countries. Example: Korea and Japa n have followi ng product ion possibilities for twocommodities, mobile pho nes and computers; assume that all the resources owned by each country are same.Mobile phoneComputerJapa n200020000Korea100015000It is clear that Japan has an Absolute advantage over Korea in both commodities. But the advantage it has is much greater for mobiles. Using the same resources as Korea it can make twice as many mobile phon es.For Japanthe ‘ cost ' Mobile phone is 10 bales of Computers, i.e. 20000/2000For Korea it is 15, i.e. 15000/1000But if we look at the case of computers we will find that here for Japan the cost of a bale of computers is one-tenth of a Mobile phone while for Korea it is one fifteenth. In terms of the output of Mobile phone foregone (opportunity cost), computer is cheaper in Korea tha n Japa n. Korea has a Comparative adva ntage in computer while Japa n has comparative adva ntage in mobile pho ne.ProtectionismProtectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive gover nment regulati ons desig ned to discour。