NYU Stern School of Business

Undergraduate College


Spring 2011

Instructor Details

Lincoln, Edward



Tuesday 4-5 p.m.

KMC 7-89


Course Meetings

TR, 2:00pm to 3:15pm

Tisch T-LC21

Final Exam: May 13

Schedule exceptions
    Class will not meet on:
    Class will meet on:


Course Description and Learning Goals


The objective of this course is to provide future decision-makers with a systematic understanding of critical aspects of the international business environment. We will examine the forces driving the world toward globalization—the integration of national business activities into globally competitive markets—and the obstacles that remain.



The course is divided into three main sections.

I.  International Trade.  As international trade plays a central role in fostering global integration, we begin the course by studying the economics of international trade in goods and services.  First, we examine the role of comparative advantage as a determinant of the location of production.  Next, we examine the effects and distributive consequences of trade, discussing who gains and who loses as a consequence of trade.  We also compare the theory of comparative advantage to other theories of trade.  Then, we examine the reasons for, and effects of, government policies that create impediments to international trade, paying attention to current issues in trade policy.

Students should be able to answer/understand the following questions/concepts (among others):

            What are the economic advantages of trade? (Why do nations specialize economically?)

            What are the economic effects and distributive consequences of trade, especially for                                 workers?  (What theories provide our basis of knowledge of these effects?)

What are the economic arguments for intra-industry trade? 

What are the effects of tariffs and non-tariff barriers to trade?

What are the economic arguments for and against protectionism?

What are the political causes of protectionism?


II.                Macroeconomics.  The second part of the course focuses on issues in the modern macro-economy.  We begin by considering how economists measure economic activity, and introduce both the definition and measurement of key macroeconomic terms, as for example, economic growth, inflation and unemployment.  Then, we study how the economy grows in the short run and in the long run, examining the importance played by productivity and the business cycle.  We also explore the role of money and banking in the economy.


Students should be able to answer/understand the following questions/concepts (among others):

            What are the meanings of terms such as GDP, CPI or durable goods?

What are the long-term sources of economic growth and why is productivity so important             in understanding growth?

How do we define a recession or recovery? 

How is the unemployment rate determined?

What monetary and fiscal policies can countries use to help manage the business cycle?

What is inflation and why is it important?

How do banks matter for a modern economy?

Why is money valuable and how do governments determine its supply?


III.  Balance of Payments, Exchange Rates, and International Finance.  The final part of the course surveys the role of money and finance in global economic activity.    We begin by considering payments between nations.  Next, we turn to the role of exchange rates as central prices in international finance.  We show how the foreign exchange market can be used to hedge risk or to speculate, and we develop some key principles of international financial investment.  We explore what factors affect the value of currencies.  We also examine the role of government policies toward the foreign exchange market, including the choice between fixed and floating exchange rates, strategies to keep currencies undervalued or overvalued, and the use of exchange controls to create impediments to currency flows.  Then, we discuss different issues in the international business environment, including the nature of financial crises, the impact of globalization, the role of foreign direct investment and multinational firms, and the current debate on immigration.


Students should be able to answer/understand the following questions/concepts (among others):

            How do individuals, firms and countries buy and sell currencies?

            What are the spot and forward exchange rates?

            What determines the value of currencies in the short and long runs?

What is purchasing power parity (PPP) and why is it a useful concept?

What choices/tools do countries have in setting the prices of their currencies?

Why do financial crises occur?

What is the difference between foreign direct investment (FDI) and financial investment?

What is the economic framework that can be used to understand the current debate on      immigration?

Summary:  This course provides a survey of these big-picture global economic issues.  It also serves as the base for the International Studies Project (ISP).  EGB does not focus on the countries you will study in the ISP, although we may refer to these countries at various points in our discussion.  Also, C30.0011 is a prerequisite for several IB elective courses, including International Business Management, International Financial Management, Economies in Transition, and my own course, The East Asian Economies.


Course Outline

Class 1:  Introduction: A Global World

Tuesday, January 25

Required Reading:      TP, chapter 1.




Class 2:  Why Do Nations Trade? Absolute and Comparative Advantage

Thursday, January 27

Required Reading:      TP, chapters 3 and 4 (pp. 49-62).


Class 3:  What Will Nations Trade? Some Determinants and Effects of Trade—It Ain’t Quite So Simple as Riccardo Thought!

Tuesday, January 31

Required Reading:      TP, chapter 4 (pp. 62-65) and 5.


Class 4:  Newer Theories of Trade: Getting Beyond Heckscher-Ohlin

Thursday, February 3

Required Reading:      TP, chapter. 6.                        


Class 5:  Trade Policy--Tariffs

Tuesday, February 8

Required Reading:      TP, chapter 8.   Skip pages 156-160).


Class 6:  Trade Policy—Quotas and Other Non-Tariff Barriers

Thursday, February 10

Required Reading:      TP, chapter 9.


Class 7:  Are There Valid Reasons for Protectionism?

Tuesday, February 15

Required Reading:      TP, chapter 10.


Class 8:  Export Promotion—Dumping, Export Subsidies, and Strategic Trade

Thursday, February 17

Required Reading:      TP, chapter 11.


 Class 9:  Regional Trade Arrangements

Tuesday, February 22

Required Reading:  TP, chapter 12.  Skip pages 274-279 and problem #10.


 Class 10:  FIRST EXAM

Thursday, February 24




Class 11: Macroeconomics Introduction and National Income Accounts

Tuesday, March 1

Required Reading:  KW chapters 6 - 7


Class 12:  Unemployment and Inflation

Thursday, March 3

Required Reading:  KW chapter 8.


Class 13:  Long Run Economic Growth

Tuesday, March 8

Required Reading:  KW chapter 9.


Class 14:  Long-Run Growth (Continued), Savings, Investment and the Financial System

Thursday, March 10

Required Reading:  KW chapter 10.


****Spring Break: no classes March 15 or 17*****


Class 15:  The Economy in the Short Run – part one

Tuesday, March 22

Required Reading:  KW chapter 11.


Class 16:  The Economy in the Short Run: Aggregate Supply/Demand and Fiscal Policy

Thursday, March 24

Required Reading:  KW chapter 12 and 13


Class 17: Money and Banking I

Tuesday, March 29

Required Reading:  KW chapter 14.


 Class 18:  Money and Banking II:  Money and Monetary Policy

Thursday, March 31

Required Reading:  KW chapters 15.


Class 19:  Second exam

Tuesday, April 5




Class 20:  Balance of Payments

Thursday, April 7

Required Reading:  TP, chapter 16


Class 21:  Foreign Exchange Markets--Introduction

Tuesday, April 12

Required Reading:  TP, chapter 17.



Class 22:  Foreign Exchange and Investment

Thursday, April 14

Required Reading:  TP, chapter 18.



Class 23:  Purchasing Power Parity and Real Exchange Rates

Tuesday, April 19

Required Reading:  TP, chapter 19.


Class 24:  Exchange Rate Policy Options I

Thursday, April 21

Required Reading:  TP, chapter 20

Class 25:  Exchange Rate Policy Options II

Tuesday, April 26

Required Reading:  TP, chapter 25 – pp. 634-635 (“What role for gold) and pp. 644-655


Class 26:  FDI, Multinationals, and Migration

Thursday, April 28

 Required Reading:  TP, chapter 15


Class 27:   Financial Crises

Tuesday, May 3

Required Reading:  TP, Chapter 21.


Class 28: Globalization—a New, Flat World?

Thursday, May 5

Thomas Friedman, “It’s a Flat World, After All,” The New York Times Magazine, April 3, 2005 (on Blackboard).


Required Course Materials

Required textbooks:

Thomas Pugel, International Economics.  New York:  McGraw-Hill/Irwin, Fourteenth Edition, 2007.  (Abbreviated P)  The bookstore should have a softbound version of just the chapters we are using.

Paul Krugman and Robin Wells, Macroeconomics. New York: Worth Publishers, 2009, Second edition.  (Abbreviated KW)

Note:  Short additional non-text readings may also be assigned when appropriate.


Assessment Components

The course is designed to be challenging and stimulating without assuming a prior background in the field.  Distribution of grades will be roughly as follows:  35% A grades, 50-60% B grades, 5-15% C grades or below.  The actual distribution of grades varies somewhat by class, but this should serve as a good guide.  Please note that ALL sections of EGB have a similar distribution to be fair to all students.


The course grade will be based on the following items:

First exam (on trade theory, Wednesday, February 22)                          30%

Second exam (on macroeconomics, Monday, April 5)                            30%

Final Exam (on international finance, Friday May 13)                            40%


All spring sections of EGB will have their final exam at a common time: Friday, May 13, 12:00 noon to 1:50 p.m.  Location TBA. 


All examinations must be taken on the date they are given; there will be no “make-up” exams



At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

Note that while the School uses these ranges as a guide, the actual distribution for this course and your own grade will depend upon how well you actually perform in this course.



The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.


Professional Responsibilities For This Course




In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:




Classroom Norms


Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 


Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 


Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.


Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.


Recording of Classes

Your class may be recorded for educational purposes


Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.


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