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International Economics:

Study of economic interactions between two or more countries is referred to as International economics. Nowadays global reach is necessary for all the countries as no country can survive in isolation. They need to get linked with several other countries through political or economic ties. This subject scope is on the inter-linkages in terms of international finance, international trade, and international monetary economics. This includes study of the flow of goods and services, flow of capital and the flow of money across international borders.

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Importance Of International Economics:

International economics is a specialized branch of economics.  It studies how trade takes place between the countries.  It covers all the transactions that take place between countries i.e. export and import of goods and services, flow of funds, foreign investment, balance of payments of the nations, restrictions on international trade and what pattern of trade a country follows.

IMPORTANCE:

Various theories of international economics provides invaluable guidance to the countries and companies why should involve themselves into international trade and invest across the globe.  These theories help to understand the nations to know-their competitive edge in the production and export of certain products with the help of theories. A company can set up its production facilities in those countries where they can be performed efficiently. Comprehensive study of these theories help nations to exhaust its factors of production to the optimum level hence it results in an increase in growth and development and welfare of nations.

International economics helps to understands various terms of trade.  It studies how and at what rate the goods of one country are exchanged for goods of another country.  Terms of trade measure the purchasing power of exports of a country w.r.t. imports.  International economics helps to formulate trade policy.  After studying the various aspects of international business environment and analyzing the political, social, economic partners, a nation can adopt a free trade regime or a restrictive trade policy.

Balance of payments, a statistical statement that systematically records all the transactions between the residents of a country and residents of all other countries, helps to forecast a country's market potential.  The study of BOP shows pressure on a country's foreign exchange rate and depicts the financial position of the country.  Foreign exchange rate, theories of exchange rate and foreign exchange market helps a country to go for a fixed or free exchange rate.  A country can formulate its foreign exchange policy after studying and analyzing these factors.

International economics helps to understand the functioning of various international bodies, WTO, UNCTAD, IMF, World Band and Asian Bank, EU and BRICS Bank.  A country can develop and align its economic policy to that of international economic bodies to safe guard its economic and national interests and can gain from international trade.  International financial institution provides capital to the nations for development purpose.

International economics is of utmost importance to an individual nations and companies as its various components help to understand the entire gamut of international trade and environment and various forces acting upon it and to find a solution to the problems emanating from the process of international transaction.

Though international economics is a helpful tool for national, companies and international managers yet it posses certain challenges to the students of international economics.  The nature of international economics is very complicated as it works in a global perspective. Global economic environment is a dynamic one and the students of international economics problems of different business environment in different countries, volatile exchange rates, different currencies and rules and regulations, various trade restrictions.

International Trade:

International Trade is a particular field in international economics that applies various microeconomic models to understand the international economy. It includes the same tools that are introduced and used in microeconomics courses, like supply and demand analysis, perfectly competitive, firm and consumer behavior, oligopolistic and monopolistic market structures, and the effects of market distortions. The typical course explains economic relationships between firms, consumers, factor owners, and the government.

Benefits of International Trade:

1. It results in increased efficiency and also allows countries to participate in a global economy.

2. It encourages the opportunity of foreign direct investment (FDI), which refers to the amount of money that individuals invest into foreign companies and other related assets.

3. International trade helps in economies to grow more efficiently.

4. International trade also helps in raising employment level of the country and leads to a growth in the gross domestic product.

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