NYU Stern School of Business

Undergraduate College


Fall 2011

Instructor Details

Foudy, Joseph


Wednesday 1-3 PM

KMEC 7-66


Course Meetings

TR, 2:00pm to 3:15pm

Tisch T-UC50

Final Exam:

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, especially the basic workings of the macro-economy and the roles of international trade and finance.  We also examine how the forces of globalization affect international business (and your future careers) as well as the challenges of economic development.



The course is divided into three main sections or modules:


I.             The first module looks at the economics of international trade in goods and services. International trade is a key driver of global integration. We examine the role of comparative advantage as a determinant of the location of production and compare it to other theories of trade.  We look at how trade creates economic winners and losers, government policies with respect to trade, and the impact of those policies. 


Students should be able to answer/understand the following questions/concepts:

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

-       What are the economic effects and distributive consequences of trade, especially for workers?

-       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.            The second module looks at issues in the modern macro-economy.  Students are introduced to how economists measure the economy and key macroeconomic terms (for example, how we define and measure economic growth, inflation, and unemployment).  We examine how the economy grows in the short and long run, the role of productivity and the impact of the business cycle.  We also explore the role of money, inflation and banking in particular.


Students should be able to answer/understand the following questions/concepts:

-       What do terms like GDP, CPI or durable goods measures quoted in the newspapers measure?

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

-       What causes a recession or recovery? 

-       Who counts in unemployment figures?

-       What monetary and fiscal policies do countries have to manage the business cycle?

-       What is inflation and why does it matter?

-       How do banks matter for the modern economy?

-       Why is money valuable and how do governments decide how much to print?




III.            The final module of the course surveys the role of money and finance in the world today. Specifically, we examine the role of foreign exchange in global 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 under or overvalued, and the use of exchange controls to create impediments to currency flows.  We also examine different issues in the international business environment, including the nature of financial crises, the impact of globalization, the role of foreign investment and multinational firms and current debates on immigration and outsourcing.  Students will also examine the problems of development and the role firms can play in fostering growth.  This is both an ethical issue facing business (How can firms help foster development?) as well as a practical issue (as developing markets are likely to be a key source of future profits). 


Students should be able to answer/understand the following questions/concepts:

-       How do individuals, firms and states buy and sell currencies?

-       What are the spot and forward exchange rates? (What are options, swaps and forwards?)

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

-       What choices do states have in setting their currencies?  What tools do they employ?

-       Why do financial crises occur?  What are the warning signs?  How can they be avoided?

-       What different strategies for economic development have states pursued? 

-       What is globalization?  How do current trends alter business today and your future career?

-       How have government-business relationships changed due to globalization? What is the race to the bottom?  Does it exist?  Is globalization undermining the wages of workers?


In short, the course provides a survey of big-picture global issues. It also serves as the base for the International Studies Project course. In addition, EGB is a prerequisite for several IB elective

courses, including International Business Management, International Financial Management, and International Marketing Management.  





The course has two objectives. 


1.  The first objective is to teach you many of the fundamental concepts, theories and tools of international economics. Some of the information imparted will be quite specific and exams will test your ability to solve them as the problem sets at the end of the chapters of the textbook demonstrate.  However, the true value of the course is in its ability to teach you fundamental concepts about international economics that you can put to use in your future careers.  While exams will feature some problems similar to those found in class and in the text, they will also test your ability to explain, defend or criticize theories or concepts. You will find also that many international economic issues are subject to simplification, distortion or misunderstanding in media coverage.  As informed observers, this class will equip you with the tools to analyze such issues, dispel myths and make informed decisions. 

2.  A second and equally important objective is to encourage critical thinking to aid you in your future business careers.  Students are expected to dissect many leading debates of the day – Do free trade and offshoring lead to lower wages for workers?  Is protectionism economically efficient and if not why do states resort to it?  What strategies can countries employ to aid development?  How can firms assist states in such endeavors while adding to their profitability?  Business leaders maintain their firms’ positions by applying their analytical reasoning skills to daily as well as strategic challenges.  They are able to question conventional wisdoms other executives take for granted or apply common sense analysis to otherwise intractable problems.  Even if students may not use all of the specific tools learned in this or other classes they take as part of their Stern education, the critical thinking skills imparted can last a lifetime.


Students are expected to have done the readings prior to class.  Before or after lectures, students can test themselves based on the problems at the end of the chapters or those used in the class. In some cases, class discussions will follow readings closely.  In others, they will not.  While solving these problems is a good test of your preparedness, please note that understanding the fundamental concepts is more important.  Again, exams will contain a mixture of problem sets as well as essays and short answer questions discussing larger theoretical issues introduced in class.  There will be short reviews and/or review sheets prior to each exam.  I don’t believe in surprises and try to communicate in advance what are the exact expectations for students on the exams.


There will be periodic handouts in class of interesting articles dealing with issues relevant to the course.  It is also recommended that you keep up with current developments in the international business environment, both for class purposes and for your own benefit. You can do this by reading the relevant articles in a good newspaper (e.g., Financial Times, Wall Street Journal, New York Times) or weekly magazine (e.g., the Economist). You are encouraged to bring up current events for discussion in class.  


Course Pre-Requisites



Course Outline



Please note that schedule and reading assignments are subject to change.


Class 1 / Sept 6                                   

Introduction– A Global World / HANDOUT OF SYLLABUS / OVERVIEW

Required Reading:  Ch. 1, Ch 3 from Pugel.

Class 2 / Sept 8                       

The Rationale for Trade– Comparative Advantage

Required Reading: Ch. 4 from Pugel.

Class 3 / Sept 13           

The Effects of Trade– Winners and Losers

Required Reading: Ch. 5 from Pugel.

Catherine Rampell, “Made in China, But Still Profiting Americans,” The New York Times, August 15, 2011

Class 4 / Sept 15

                                    Alternative Theories of Trade

Required Reading: Ch. 6 from Pugel.           

Class 5 / Sept 20

                                    Trade Policy: Tariffs

Required Reading: Ch. 8 from Pugel.

Class 6 / Sept 22

                                    Trade Policy: Non-Tariff Barriers

Required Reading: Ch. 9 from Pugel.

Carolyn Cui, “Price Gag Puts Spice in Sugar-Quota Fight,” The Wall Street Journal, March 15, 2010

Class 7 / Sept 27

Arguments For and Against Protectionism

Required Reading: Ch. 10 from Pugel.

Keith Bradsher, “Hybrid in a Trade Squeeze,” The New York Times, Sept. 5, 2011

Hufbauer and Grieco, “The Payoff From Globalization,” The Washington Post, June 7, 2005.

Class 8 / Sept 29

Dumping and Export Subsidies

Required Reading:  Ch. 11 from Pugel.

Class 9 / Oct 4

            FIRST EXAM (Classes 1-8 only / Pugel Text and Other Trade Readings)



Class 10 / Oct 6

Introduction and National Income Accounts

Required Reading:  Ch. 6 and 7 from Krugman/Wells.


Class 11 / Oct 13

National Income Accounts (Continued), Start of Long Run Growth

Required Reading:  Ch. 8 from Krugman/Wells

Frederic Mishkin (Federal Reserve Governor), “Headline vs. Core Inflation in the Conduct of Monetary Policy,” Speech, October 20, 2007


Class 12 / Oct 18

Long-Run Economic Growth

Required Reading:  Ch. 9 from Krugman/Wells.

                                    William Lewis, “The Power of Productivity, The McKinsey Quarterly, May 2004


Class 13/ Oct 20

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

Required Reading:  Ch. 10 from Krugman/Wells.


Class 14 / Oct 25

The Economy in the Short Run/Fluctuations

Required Reading:  Ch. 11 from Krugman/Wells.

“Much Ado about Multipliers: Economic focus,” The Economist, Sept. 26, 2009.


Class 15 / Oct 27

Aggregate Demand and Aggregate Supply / Fiscal Policy and Deficits

Required Reading:  Ch. 12 and 13 from Krugman/Wells.

Simon Johnson and James Kwak, “Four Steps to US Fiscal Health,” Op-Ed. Project Syndicate, August 2010


Class 16 / Nov 1                       

Money and Banking I

Required Reading:  Ch. 14 from Krugman/Wells.

                                    Krugman, Babysitting Parable


Class 17 / Nov 3              

                                    Money and Banking II

Required Reading:  Ch. 15 from Krugman/Wells.

Sandra Pianalto, “Current Issues in Monetary Policy,” Federal Reserve Bank of Cleveland, April 7, 2011


Class 18 / Nov 8

SECOND QUIZ (COVERS all lectures based on Classes 10-17)





Class 19 / Nov 10           

Balance of Payments

Required Reading: Ch. 16 from Pugel.

Ben Bernanke (Federal Reserve Chairman), Global Imbalances speech from 2007

C. Fred Bergstren, “New Imbalances Will Threaten Global Recovery” The Financial Times, June 10, 2010

Class 20 / Nov 15           

The Foreign Exchange Market

Required Reading: Ch. 17 from Pugel.

Class 21 / Nov 17           

Foreign Exchange and Investment I  (Futures, Options and Swaps)

Required Reading: Ch. 18 from Pugel.                       

Class 22 / Nov 22           

The Determination of Exchange Ratesand Purchasing Power Parity

Required Reading: Ch. 19 from Pugel.           

Class 23 / Nov 29           

Exchange Rate Policy Options I

Required Reading: Ch. 20 from Pugel.

Class 24 / Dec 1

Exchange Rate Policy Options II

Required Reading: Part of Ch. 25 from Pugel. pp. 644-655 (also “What Role for Gold?”, pp. 634-5).

Class 25  / Dec 6           

Financial Crises

Required Reading: Ch. 21 from Pugel.

Class 26 / Dec 8           

Financial Crises II and The Challenges of Development

                                    Required Reading: Ch. 14 from Pugel.

Edward Wong, “China Faces Obstacles in Bid to Rebalance its Economy,” The New York Times, August 24, 2011

Video Clip Commanding Heights (Episode 3 via “External Links” on Blackboard)

Class 27 / Dec 13           

Globalization - FDI, Multinational Corporations and Immigration

Required reading:  Ch. 15 from Pugel.

Class 28 / Dec 15           

Globalization – A New, Flat World?           

Required Reading:  Ch. 13 from Pugel.

Thomas Friedman, “It’s a Flat World, After All,” The New York Times Magazine, April 3, 2005, p. 33




December 23rd (Friday)            FINAL EXAM  / FROM 10AM to 11:50 AM                          Good Luck J


Required Course Materials


COURSE MATERIALS             Both textbooks are available in hard copy or as e-books.


Required textbooks:             Custom reader for Thomas Pugel, International Economics, 14th edition, Irwin McGraw-Hill, 2008 (Abbreviated Pugel)

Custom reader for Krugman Wells, Macroeconomics, 2th edition, Worth, 2009.   (Abbreviated Krugman)


Other readings will also be posted on blackboard or with links for download from the library.


Assessment Components

 The course grade will be based on the following items:

First Exam             30%

Second Exam             30%

Final Exam             40%

Memo (s)  (if assigned)            Ungraded



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, including a brief written statement of why you believe that an error in grading has been made.


Professional Responsibilities For This Course




In general, there is no required attendance.  Students should come to class prepared to discuss assigned topics and current issues of the day.  (In terms of your own value, there are 28 class meetings. Taking away quizzes and the introduction, that leaves 25 class meetings.  So every absence is 4% of the course!)   If a guest speaker comes to speak to the class (not planned, but possible), attendance is required that day and failure to attend may lead to a grade penalty.  Some short memos (1 page) may be assigned during the semester at the discretion of the professor (again, not planned, but possible).  Memos (again, only if assigned) are required and marked “acceptable” or “requiring rewrite,” but are not graded.


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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