The discipline of international economics is composed of two main parts; international trade and international money.

International trade refers to the real side of international economics while international money refers to the monetary side of international economics.

The analysis on international trade part takes the real transactions into consideration , leaving the money aside. In other words, international trade analysis is based on the physical movement of goods or services. In this respect, we can conjure up a simple system of barter.

The international money part deals with the financial transactions like foreign exchange, foreign exchange markets, foreign exchange rate systems, payments among the nations, investment flows, and balance of payments.

Barter is an exchange of a commodity for another.

Volume of trade gives the total amount of imports and exports.

Imports are the goods or services that are bought from a foreign country.

Exports are the goods or services that are sold to a foreign country.

If total imports are more than the total exports within an economy, then there is a trade deficit.

When total exports exceed total imports, it means that there is a trade surplus.

Terms of trade of a nation are found by the ratio of the price index of its exports to the price index of its imports. If this ratio is to be expressed in percentage, it is multiplied by hundred. These terms of trade can also refer to commodity terms of trade or net barter terms of trade.

Pattern of trade refers to exported and imported commodities of each nation. In conjunction with the growth of world economy, pattern of trade has also changed, reflecting the ongoing structural transformation. Due to the decrease in transportation costs, most of the non-traded commodities of the past are the traded commodities of today. Homogeneous commodities are traded only if the pretrade price difference in the two trading countries exceeds the transportation costs.

Transportation costs comprise of freight charges, warehousing costs, costs of loading and unloading, etc. Due to positive economies of scale within the logistic sector, the transportation costs have been decreasing. The decrease in the transportation costs and the improvement within the transportation facilities have enabled a number of non-traded commodities to be converted into traded commodities.

Trade restrictions are usually classified into two main groups, namely the tariffs and non-tariff restrictions.

Tariffs have been the mostly used trade restrictions ever since the beginning of international trade among the countries. A tariff is a tax or a duty that is levied on a traded commodity while it gets through a national border. Tariffs can be implemented both on the imports and exports. Since import tariffs have a broader implementation than the export tariffs all over the world, most discussions are on them and their economic effects. Import tariffs are widely used by the industrialized countries on the imports coming from the developing countries while the export tariffs are implemented by the developing countries on their labor-intensive exports.

Non-tariff restrictions are all types of trade restrictions other than the tariffs. They can be in the form of quotas, technical and administrative regulations, voluntary export restraints (VERs), export subsidies, dumping, domestic content requirements, public procurement provisions, international cartels, etc.

The exchange of national currency with foreign currencies is done at the foreign exchange market. It is the price of a national currency in terms of another currency. The foreign exchange market is not a marketplace where the suppliers and the consumers meet. Thus, a foreign exchange market is different from a commodity market in this respect. The participants of the foreign exchange market are individuals, firms, traders, investors, commercial banks, speculators, arbitrators, and the Central Bank of countries, which can be thousands in numbers.

The price of a national currency in terms of another currency is called foreign exchange rate. At the flexible exchange rate system, the foreign exchange rate is determined at the foreign exchange market by the supply and demand of the foreign currency. Nevertheless, it is identified by the Central Bank of the country at the fixed exchange rate system. In other words, Central Bank does not allow to any fluctuation on the foreign exchange rate. Thus, the foreign exchange rate is fixed and kept at its fixed level at the fixed exchange rate system.

Lowering the value of the national currency by the decision of the Central Bank is called devaluation.

Raising the value of the national currency by the decision of the Central Bank is referred to revaluation.

Due to free floating of foreign exchange rate at foreign exchange rate market, a decrease in the value of the national currency compared to a foreign currency refers to currency depreciation.

Due to free floating of foreign exchange rate at foreign exchange rate market, an increase in the value of the national currency compared to a foreign currency refers to currency appreciation.

Balance of payments is a summary statement of an economy in which all the international transactions of its residents are recorded during a calendar year. Essentially, balance of payments displays the foreign currency inflows and outflows of an economy at a particular period of time. Balance of payments gives fundamental information on the foreign exchange status of an economy for the government, investors and the foreign traders.

Credit accounts are the accounts that give rise to the inflow of the international payments to the country.

Debit accounts are the accounts that give rise to the outflow of the international payments from the country.

Merchandise trade is quantities and values of goods moving into or out of an economy.

Business-to-business (B2B) e-commerce includes a broad range of intercompany transactions like purchases of services, manufactured parts and components, capital equipment and technology.

Business-to-consumer (B2B) e-commerce refers to shopping of the consumers from a range of businesses via internet resources. Internet serves as a convenient platform for the consumers to prefer B2C e-commerce, owing to cost-benefit analysis, a broad range of products with relatively high standards.

Digital economy is a term that incorporates all the economic processes, transactions and activities on digital technologies. Digital economy has a broader scope than the internet economy since it embraces many digital tools including the internet and its facilities while the internet economy refers only to the internet connectivity.

Main instruments of the digital economy which have started to affect the international trade are the Internet of Things, Artificial Intelligence, 3D Printing and Blockchain.

The definition of the IoT is not an easy matter. The most compelling task is to determine its scope. Although there are various definitions of numerous institutions, we take the broad definition of the OECD (Organization for Economic Cooperation and Development): The IoT in broad terms includes all devices and objects whose state can be altered with or without the active involvement of individuals. This includes laptops, routers, servers, tabletsand smartphones, often considered to be part of the “traditional Internet”. However, these devices are integral to operating, reading and analyzing the state of IoT devices and frequently constitute the “hearts and brains” of the system. As such, it would not be correct to exclude them.

Artificial intelligence (AI) is the design, implementation and use of the programs, machines and systems that expose human intelligence. In other words, the AI is the field of study that seeks to explain intelligent behavior via computer science.

3D (Three Dimensional) printing, also known as Additive Manufacturing (AD). Actually, AD is a broader term that encompasses the 3D printing. Actually, a 3D printer is a machine that can transform a blueprint into a physical and tangible object.

A blockchain is a distributed database of records or public ledger of all transactions or digital events that have been implemented and shared among participants. Each transaction within the public ledger is collected and confirmed by consensus of the majority of the participants of the blockchain system. The significant feature of this system is that the information which is entered can never be erased.

Theory of Absolute Advantage is the theory of Adam Smith who has been accepted as the father of the Classical Trade Theory. According to the Theory of Absolute Advantage, both of the trading countries can gain if each of them produces the commodity in which they are more efficient.

Theory of Comparative Advantage is the theory of David Ricardo who has improved the Theory of Absolute Advantage. According to the Theory of Comparative Advantage both of the trading countries can gain if each of them produces the commodity in which their absolute disadvantage is smaller.

Labor Theory of Value regards to the labor theory of value, the price of a commodity is determined solely on the amount of labor used in the production of the commodity. In other words, the theory depends on the differences of labor productivity.