ABSTRACT
This chapter aims to distinguish between a fixed and a flexible exchange rate and aims to differentiate between the balance of payments and the balance of trade. It describes the advantages and disadvantages of international trade and provides the arguments in favor of and against protective tariffs. The chapter examines whether the United States is a debtor or a creditor nation and explain what that means. It discusses the advantages and disadvantages of limiting imports to protect US jobs from the threat of globalization and also provides economists’ views of international trade. Trade is the lifeblood of a modern economy, and the benefits of international trade are so great that it is inconceivable that a modern nation would adopt a policy of complete economic isolation. Most economists believe that if trade could flow freely and securely through the world, would be a great expansion of its total volume and that in the long run all nations would be more prosperous.
