Economics Today and Tomorrow

Chapter 18: Trading With Other Nations

Chapter Overviews

International trade involves huge corporations but affects the everyday lives of workers and consumers. Chapter 18 analyzes the benefits of international trade, explores currency exchange rates and their effects on nations' balances of trade, and reviews barriers to world trade.

Absolute and Comparative Advantage
This chapter describes the differences between absolute advantage and comparative advantage in trade among nations and explains how to calculate both. The transition from a fixed rate of exchange to the current flexible exchange rate among international currencies is examined, with a review of how America's balance of trade has changed over two decades.

Free Trade?
The chapter concludes with an examination of how imports can be restricted by tariffs, quotas, and embargoes. The main arguments for and against free trade are included, along with descriptions of some of the current international and regional trade agreements.