ABSTRACT
This chapter begins by analysing the impact of international trade on national income. The balance of payments, interest rates, devaluation and fixed and floating exchange rates come next. The theory of comparative advantage, the determination of international prices and how these signal specialisation and gains from trade, plus predictions are all fully developed. Next comes further implications of comparative cost theory, what determines comparative advantage, Argentina, the gravity theory of trade and Krugman’s new trade theory. The arguments for protecting infant industry, South Korea, externalities and issues of dependence and vulnerability conclude.
