chapter  1
THE CHANGING WORLD
Pages 5

In international economic text books it is conventional to start by justifying the need for a separate branch of the subject. The reason for doing so is self-evident. The whole of economics should be ‘international’, for example all macroeconomic analysis must take account of overseas factors. In many ways international economics is the natural extension and complement to the other branches of economics. For example, the pure theory of international trade, Chapter 2, is an extension of the elementary analysis of the gains from exchange. Commercial policy, Chapters 3 and 4, is a complement to other analyses of government intervention. Balance of payments theory, Chapters 6 to 10, extends Keynesian and monetarist analysis to an open economy and analyses the exchange rate as another macroeconomic weapon. Chapters 11 to 13, international fi nance, similarly complement domestic fi nancial economics.