1. Introduction to the Global Economy. 1.1 We Live in a Global Economy. 1.2 The Globalization Challenge. 1.3 International Trade and the Nation's Standard of Living. 1.4 The International Flow of Labor and Capital. 1.5 The Subject matter of International Economics. 1.6 Current International Economic Problems. 1.7 International Organizations and the World Economy. 1.8 Organization of the Text. Part One: International Trade Theory. 2. Comparative Advantage. 2.1 Introduction. 2.2 Mercantilists' Views on Trade. 2.3 Trade Based on Absolute Advantage: Adam Smith. 2.4 Trade Based on Comparative Advantage: David Ricardo. 2.5 Gains from Trade with Comparative Advantage. 2.6 Comparative Advantage with Money. 2.7 Comparative Advantage and Opportunity Costs. 2.8 Production Possibility Frontier with Constant Costs. 2.9 Opportunity Costs and Relative Commodity Prices. 2.10 Basis for and Gains from Trade Under Constant Costs. 3. The Standard Trade Model. 3.1 Introduction. 3.2 The Production Frontier with Increasing Costs. 3.3 The Marginal Rate of Transformation. 3.4 Community Indifference Curves. 3.5 Equilibrium in Isolation. 3.6 The Basis and the Gains from Trade with Increasing Costs. 3.7 Equilibrium-Relative Commodity Prices with Trade. 3.8 Terms of Trade. 3.9 Specialization, Trade, and Deindustrialization. 4. The Heckscher-Ohlin and Other Trade Theories. 4.1 Introduction. 4.2 Factor Endowments and the Heckscher-Ohlin Theory. 4.3 The Formal Heckscher-Ohlin Model . 4.4 Factor-Price Equalization and Income Distribution. 4.5 Empirical Tests of the Heckscher-Ohlin Theory. 4.6 Economies of Scale and International Trade. 4.7 Trade Based on Product Differentiation. 4.8 Technological Gap and Product Cycle Models. 4.9 Transportation Costs and International Trade. 4.10 Environmental Standards and International Trade. Part Two: International Trade Policy. 5. Trade Restrictions: Tariffs. 5.1 Introduction. 5.2 Types of Tariffs. 5.3 Effects of a Tariff in a Small Nation. 5.4 Effect of a Tariff on Consumer and Producer Surplus. 5.5 Costs and Benefits of a Tariff in a Small Nation. 5.6 Costs and Benefits of a Tariff in a Large Nation. 5.7 The Optimum Tariff and Retaliation. 5.8 Theory of Tariff Structure. 6. Nontariff Trade Barriers and the Political Economy of Protectionism. 6.1 Introduction. 6.2 Import Quotas. 6.3 Other Nontariff Trade Barriers. 6.4 Dumping and Export Subsidies. 6.5 The Political Economy of Protectionism. 6.6 Outsourcing, Offshoring, and Fear of Globalization. 6.7 Strategic Trade and Industrial Policies. 6.8 History of U.S. Commercial Policy. 6.9 The Uruguay Round. 6.10 Outstanding Trade Problems and the Doha Round. Part Three: International Trade and Investment Relations. 7. Economic Integration. 7.1 Introduction. 7.2 Forms of Economic Integration. 7.3 Trade Creation and Trade Diversion in Customs Unions. 7.4 Dynamic Benefits from Customs Unions. 7.5 The European Union. 7.6 The European Free Trade Association. 7.7 U.S. Free Trade Agreements and The North American Free Trade Agreement. 7.8 Attempts at Economic Integration Among Developing Countries. 7.9 Economic Integration in Central and Eastern Europe and in the Former Soviet Republics. 8. Growth and Development with International Trade. 8.1 Introduction. 8.2 Growth and Development Over Time. 8.3 Trade Theory and Economic Development. 8.4 The Contributions of Trade to Development. 8.5 The Terms of Trade and Economic Development. 8.6 Immiserizing Growth. 8.7 Export Instability and Economic Development. 8.8 Import Substitution Versus Export Orientation. 8.9 Trade Liberalization and Growth in Developing Countries. 8.10 Current Problems Facing Developing Countries. 9. International Resource Movements and Multinational Corporations. 9.1 Introduction. 9.2 Types of Foreign Investments. 9.3 Data on International Capital Flows. 9.4 Motives for International Portfolio Investments. 9.5 Motives for Direct Foreign Investments. 9.6 Effects of International Capital Flows on Investing and Host Countries. 9.7 Reasons for the Existence of Multinational Corporations. 9.8 Problems Created by Multinational Corporations in the Home Country. 9.9 Problems Created by Multinational Corporations in the Host Country. 9.10 Motives and Welfare Effects of International Labor Migration. Part Four: The Balance of Payments, Foreign Exchange Markets, and Exchange Rates. 10. Balance of Payments. 10.1 Introduction. 10.2 The Balance of Payments: Definition and Use. 10.3 Balance-of-Payments Accounting Principles: Credits and Debits. 10.4 Double-Entry Bookkeeping. 10.5 The International Transactions of the United States. 10.6 Accounting Balances and Disequilibrium in International Transactions. 10.7 Measuring Deficits or Surpluses in the Balance of Payments. 10.8 The Postwar Balance of Payments of the United States. 10.9 The International Investment Position of the United. 11. The Foreign Exchange Market and Exchange Rates. 11.1 Introduction. 11.2 Functions of the Foreign Exchange Market. 11.3 Equilibrium Exchange Rates. 11.4 Cross Exchange Rates, Effective Exchange Rates, and Arbitrage. 11.5 The Exchange Rate and the Balance of Payments. 11.6 Spot and Forward Exchange Rates. 11.7 Foreign Exchange Futures and Options. 11.8 Foreign Exchange Risks. 11.9 Hedging. 11.10 Speculation. 11.11 Interest Arbitrage. 12. Exchange Rate Determination. 12.1 Introduction. 12.2 Overview of Exchange Rate Determination. 12.3 Trade or Elasticity Approach. 12.4 Purchasing-Power Parity Theory. 12.5 The Monetary Model to Exchange Rates. 12.6 Asset or Portfolio Model of Exchange Rates. 12.7 Exchange Rate Dynamics. 12.8 Exchange Rate Forecasting. Part Five: Open-Economy Macroeconomics. 13. Automatic Adjustments with Flexible and Fixed Exchange Rates. 13.1 Introduction. 13.2 Adjustment with Flexible Exchange Rates. 13.3 Stability of the Foreign Exchange Market. 13.4 Adjustment with Fixed Exchange Rates: The Gold Standard. 13.5 Income Determination in a Closed Economy. 13.6 Income Determination in an Open Economy. 13.7 Foreign Repercussions. 13.8 Absorption Approach. 13.9 Synthesis of Automatic Adjustments with Rates. 14. Adjustment Policies. 14.1 Introduction. 14.2 National Objectives and Policies. 14.3 Policies to Achieve Internal and External Balance with Fixed but Changeable Exchange Rates. 14.4 Effect of Monetary Policy on Internal and External Balance Under Fixed Exchange Rates. 14.5 Effect of Fiscal Policy on Internal and External Balance Under Fixed Exchange Rates. 14.6 Policy Mix for Internal and External Balance Under Fixed Exchange Rates. 14.7 Effect of Monetary and Fiscal Policies on Internal Balance Under Flexible Exchange Rates. 14.8 Correcting Unemployment with Inflation. 14.9 Policy Mix in the Real World. 14.10 Direct Controls. Part Six: The International Monetary System: Past, Present, and Future. 15. Flexible versus Fixed Exchange Rates, European Monetary System, and Macroeconomic Policy Coordination. 15.1 Introduction. 15.2 Fixed Versus Fixed Exchange Rates: An Overview. 15.3 The Case for Flexible Exchange Rates. 15.4 The Case for Fixed Exchange Rates. 15.5 Optimum Currency Areas. 15.6 European Monetary System and Transition to Monetary Union. 15.7 The Creation of the Euro, the European Central Bank, and the Common Monetary Policy. 15.8 Currency Board Arrangements and Dollarization. 15.9 Adjustable Pegs, Crawling Pegs, and Managed Floating. 15.10 International Macroeconomic Policy Coordination. 16. The International Monetary System: Past, Present, and Future. 16.1 Introduction. 16.2 Meaning of International Monetary System. 16.3 The Gold Standard and the Interwar Experience. 16.4 The Bretton Woods System. 16.5 Operation and Evolution of the Bretton Woods System. 16.6 U.S. Balance-of-Payments Deficits and Collapse of the Bretton Woods System. 16.7 Operation of the Present International Monetary System. 16.8 Problems with the Present International Monetary System and Proposals for Reforms. 16.9 Financial Crises in Emerging Market Economies. 16.10 Other Current International Economic Problems. Glossary. Name Index. Subject Index.