List a few topics about economics(international economy) and briefly explain them.
Few topics about international economics are listed below:
- Absolute advantage theory
- Comparative advantage theory
- Heckscher-Ohlin Theory
- Balance of Payments
Absolute advantage theory
Absolute advantage occurs when a nation produces more quantity of goods and services in comparison to its competitor by employing equal resources.
Comparative advantage theory
Comparative advantage occurs when a nation generates a good or render service with lower opportunity costs in comparison to its competitor.
Heckscher-Ohlin Theory
It is a theory of comparative advantage in foreign trade that claims that countries with abundant capital and scarce labor will tend to export capital-intensive goods and import labor-intensive products, whereas countries with abundant labor and scarce capital will tend to export labor-intensive products and import capital-intensive products.
Balance of payments
The Balance of Payments (BOP) is a statement that keeps track of all monetary activities between citizens of a nation and the rest of the world over a given time span.
There are three components of balance of payment, that is, current account, capital account, and financial account.
The current account record transactions related to the movement of goods and services between countries.
The capital account record transactions related to purchase and sale of fixed assets, loans and borrowings, foreign exchange reserves, etc.
The financial account record transactions related to investments in real estate, foreign direct investment, etc.