International economics · Start here
International economics, mapped by the question you are stuck on
Each page below answers one question students keep getting wrong, and can be read cold. There is no fixed order and no course to finish: find your question, read that page, and follow its “read next” links when you are ready. 9 pages are open now.
How the topics connect
The exchange-rate topics are one chain, and seeing the chain makes each page easier. Prices and interest rates, through the parity conditions, help set the exchange rate. The exchange rate, adjusted for prices, sets how competitive a country’s goods are. Competitiveness drives the trade balance, which is the main part of the current account. The current account, with capital flows, fills the balance of payments, and what is left over has to be absorbed by reserves or by the exchange rate itself, which brings you back to the start.
1Interest rates and pricesParity conditions tie the exchange rate to inflation and to interest rates.Open the page2The exchange rateNominal, real and effective: the price that moves.Open the page3Trade and competitivenessWhether a weaker currency actually improves the trade balance.Open the page4The balance of paymentsWhere the flows are recorded, and what the reserves absorb.Open the page
Balance of payments and exchange rates
The most-asked area: accounts, rates, parity, and what a devaluation does.
“I never know whether the rupee has appreciated or depreciated, or how to convert currencies and work out the real exchange rate.”Exchange rates: nominal, real and effective, and which way is upQuotes, appreciation and depreciation, conversion and cross rates, the real exchange rate and how to derive its shortcut, the effective rate, and what moves a floating rate.“Where does this item go in the balance of payments, and why does it always add up to zero?”Balance of payments: current, capital and financial accountsWhat the accounts record, a double-entry drill, where every exam item belongs, the identity, why a deficit has to be financed, and the saving-investment link.“Which parity formula do I use, which way do I annualise, and why are the numericals so easy to get wrong?”PPP and interest rate parity, covered and uncoveredThe law of one price, absolute and relative PPP, forward markets, covered and uncovered interest parity, with a lab for each and the numeric traps examiners use.“When does a devaluation improve the trade balance, and why does it get worse first?”Marshall-Lerner condition, the J-curve and devaluationThe condition derived step by step, a J-curve lab, the price-taker and deficit cases, and the elasticities and absorption approaches compared.“What is the difference between a fixed, floating and managed rate, why can a country not have an independent monetary policy with a fixed rate, and what is sterilisation?”Exchange rate regimes and the impossible trinityThe regime menu, how gold and Bretton Woods gave way to floating, a lab that defends a peg until it breaks, a central bank balance sheet under sterilisation, and the trilemma derived from interest parity.
Trade policy
Tariffs, quotas and the case for and against protection.
“What does a tariff do to welfare, and how is a quota different?”Tariffs and quotas: every case, from autarky to a large countryAutarky, free trade, import bans, small and large countries, tariffs, quotas, voluntary export restraints, tariff-rate quotas, subsidies and effective protection, all on one diagram.“Why can a large country gain from a tariff, and how big should it be?”Optimum tariff, the terms-of-trade argument and the Metzler paradoxThe optimum tariff derived as a monopsony, a tariff-war lab with its prisoner's dilemma, and the Metzler paradox with its condition derived.“Which arguments for protection hold up, how is dumping defined, and when is a tariff the wrong tool?”Arguments for protection: infant industry, dumping and tariffs against sales taxesThe nine arguments sorted, the infant industry with the Mill and Bastable tests, dumping as price discrimination, a tariff against a sales tax, and a Cournot duopoly with a tariff.
Integration and institutions
Blocs, customs unions, the IMF, the World Bank and the WTO.
India's external sector
The balance of payments, the rupee and trade policy, with every figure sourced.
Pages for this group are being written.
Already built
These pages are part of the same subject, and the new pages link to them:
- Theories of international trade, from mercantilism to Krugman: absolute and comparative advantage, offer curves and the terms of trade, Heckscher-Ohlin and its theorems, the Leontief paradox, and new trade theory.
- The IS-LM-BP model explained: the BP curve, capital mobility and all 16 policy cases under fixed and floating rates.
- Mundell-Fleming: the open-economy lesson of the IS-LM to AD-AS module.
What the exams ask
The question bank holds 230 past-paper questions tagged to trade policy, balance of payments and exchange rates, and integration, counted on 5 October 2026. Hyderabad and JNU set about 60% of them.
Hyderabad (UoH)72Definitions, classification and one-step numbers
JNU64Numerical and diagram questions
UGC NET46Statement, matching and chronology items
CUET-PG29Direct questions and short numericals
GATE7Short numerical entries
DSE7Few, but hard
IIT JAM5Numerical entries
Quick answers
What topics does international economics cover in entrance exams?
Four clusters: the theory of trade (comparative advantage, Heckscher-Ohlin and the theorems), trade policy (tariffs, quotas and protection), the balance of payments and exchange rates (accounts, real and nominal rates, PPP, interest parity, Marshall-Lerner, regimes), and integration and institutions (customs unions, the IMF, World Bank and WTO).
Which international economics topic is asked most often?
In the TestStop question bank, the balance of payments and exchange rates account for roughly half of the questions tagged to international economics: current account classification, real and nominal exchange rates, PPP and interest parity, and Marshall-Lerner together make up the largest share.
Where do I start with international economics?
Start with the balance of payments accounts and the exchange-rate page, since every later topic uses their vocabulary. Then take PPP and interest parity, and the Marshall-Lerner condition. If your exam is heavy on trade theory, work through the international trade module first.