1. 1 International Economy Week 1 Prepared by Shi Young Lee* (Chung-Ang University) March 1, 2010

2. 2 Preliminaries  Why Study? - Knowledge economy - The analysis and creativity are the key to the success in knowledge economy - Persuasion is important in knowledge economy and in order to persuade others, creativity (ideas) is important - Examples: Steve Jobs & W. Buffet - Knowledge pays off

3. Preliminaries  What is Study? - “Think logically and then reorganize” - When you think logically and reorganize, then organized thinking can foster creativity - Purpose of presentation is to persuade others  logical presentation is the most effective way to persuade others - Job interview 3

4. Preliminaries  Tips for Effective Studying - 10 minutes drill - Two-way communication (Socrates Method)  Explain the concepts of international economics to your friends - Do not just read materials  Read with analytical skills - Use examples and counter examples 4

5. Preliminaries  Objectives of Course - To understand basic concepts of international economics and provide some applications - To develop analytical skills and foster creativity - To prepare for a globalized world 5

6. Preliminaries  Comparison: How this course is different from other international economics courses - Traditional international trade course= theory oriented and abstract at an undergraduate level - From the perspective of economy rather than firm 6

7. Preliminaries  Features of this Course - This course stresses the role of firms rather than economy and thus tries to design business applications (multinational corporations and foreign subsidiaries) - At the same time, this course analyzes the functions of economy and the effects of economic policies on the business firms in a globalized world 7

8. 8 Basic Concept of Exchanges & Trade  Introduction to Economics - Paradigm of Economics: Rational agents maximize (expected) profits or utilities - Economics is a story-telling that describes (interesting) social phenomena - In order to describe complicated social phenomenon, economics simplifies stories so that they can stress some important phenomena  Economics models are basically simplified stories - To strengthen our stories, we provide empirical evidence and facts.

9. 9 Basic Concept of Exchanges & Trade  Introduction to International Economics - International Economics is composed of international trade & international finance - Trade: micro tool /finance : macro analysis - Traditional approach: separate field of international trade and finance - Incorporate international trade into finance and add business applications in a globalized world