The subject ‘International Economics’ evolved from a simple theory of international trade was formulated to answer a few basic questions. The subject first originated in Western Europe on account of increasing importance of foreign trade in that part of the world. The contributions of classical economists like Adam Smith, David Haberler Ricardo, F.W. Taussig, Haberler, J.S.Mill and Bela Balassa shaped the subject matter of International Economics.
International Economics studies the entire range of international economic transactions that consist of not only trade in goods and services but also capital flows, technology transfer, the rate of exchange, balance of payments, and issues relating to tariffs, protection, free trade, investment flows, role of fiscal and monetary policies pursued by individual countries.