These days,-the subject matter of International Economics comprises a large number of segments which, in turn, can be divided into several parts.
It is obvious that the coverage of topics and arrangement and depth of their analysis would depend upon the purpose of the study. Broadly speaking, however, international economics covers the following main components.
1. Pure Theory of Trade:
It tries to explain the reasons for international trade in goods and services, determination of the composition, direction and volume of trade; determination of the terms of trade between exports and imports of a country; determination of rate of exchange and changes in it; concepts and issues relating to balance of trade and balance of payments, as also the concepts of their equilibrium and disequilibrium.
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2. Policy Issues:
This portion of international economics covers a wide area of relevant questions and a choice of associated policy alternatives. Examples include (a) free trade vs protection, (b) methods of regulating trade, capital and technology flows, (c) use of taxation, subsidies and dumping; (d) exchange control and convertibility, (e) issues relating to foreign aid, external borrowings and direct foreign investment, (f) alternative measures of correcting balance of payments disequilibrium and the like.
3. International Cartels and Trade Blocs, etc:
Opening up of international trade and economic flows is accompanied by attempts, with varying degrees of success, of economic integration in the form of international cartels, customs unions, monetary unions, trade blocs, economic unions and so on.
The operations of multinational corporations are also pushing the entire world economy into a new pattern. The subject of international economics should cover these dimensions of international economic relations as well.
4. International Financial and Trade Regulatory Institutions:
After the Second World War, a number of international financial and trade-regulatory institutions have come into existence.
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They are deeply influencing international economic-transactions and relations and, for this reason, their study should be considered a part of international economics.
5. India and the World:
For Indian students and others interested in the Indian economy, a study of Indian economy vis-a-vis the rest of the world should form an integral part of the subject matter of international economics.
Such a study helps in formulating an appropriate policy framework for accelerating our economic growth, reducing poverty and unemployment and enhancing our economic welfare.