6.2: Macroeconomic Policy around the World
International macroeconomics, or international finance, studies monetary interactions between two or more countries, focusing on foreign direct investment and currency exchange rates. The economics of the international economy can be divided into two broad categories: the study of international trade and the study of international money. International economics studies international trade and open economy macroeconomics. The field is in equal parts theoretical and empirical and increasingly seeks a close synthesis of theory and data.
Geography, demographic, industry structure, and economic institutions impact the standard of living countries enjoy. What do we mean when we classify countries as low-income, lower-middle, upper-middle, and high-income? This reading also explains how we measure international living standards using GDP and gross national income (GNI).
Economic growth works best in a stable and market-oriented economic climate. Countries use fiscal and monetary policies to encourage economic growth. Fiscal policies include government investments in human capital (such as education and universal healthcare), technology, physical plant, and equipment. Monetary policies include keeping inflation low and stable, minimizing fluctuations in the exchange rate, and encouraging domestic and international competition. Political instability, high poverty rates, and inadequate infrastructure make this process challenging for many countries.
Read this text on the nature and causes of unemployment from a global perspective.
Read this text on the causes and crippling effects of high inflation. What is a converging economy?
This text explores how the trade balance affects foreign exchange markets and the international flow of goods, services, and capital.