In this lecture we begin our look at the global economy. We will look first at the basis for trade: differences in the comparative advantages of nations. We will then look at the reasons for these differences in comparative advantage. Finally, we will examine the types of trade barriers that are used and the arguments for and against free trade. Upon completion of this lecture, you should understand and be able to answer these key questions:
1. Does the United States have a trade surplus or trade deficit with other countries?
2. If a country is better at producing something than another country, shouldn't it produce it?
3. What gives a country a comparative advantage in something?
4. What kinds of trade barriers are used to restrict trade?
5. Isn't it good to protect ourselves from foreign competition?