We all know that the world has shrunk, or in the words of Thomas Friedman, it
has become flat. We'll look at the level of imports and exports, talk about the
theory and the reality of global trade, and also consider changes in currency exchange.
Question 1: What are the arguments, pro and con, for greater trade among nations and outsourcing?
Question 2: Will the U.S. dollar continue to be the de facto world currency; will
its value hold; and should we care?
Early philosophers, in Classical times, thought poorly of traders, regarding them
as necessary evil. The growth of cities required trade to overcome the gap in production
from the countryside. Religious leaders mocked and scorned traders. Not until the
15th and 16th centuries did major countries embrace trade, and then only on their
The economic theory around trade is pretty clear – trade is good and often benefits
both sides. The political opinion is more divided. Your instructor’s position is
that trade among nations is inevitable and that efforts to limit it will usually
backfire and hurt the economy. YMMV - Your Mileage May Vary
The US dollar is the de facto world currency, for better or for worse. It’s value
is driven by demand for US products and the interest in investing in the US. A
strong dollar feels good, but hurts exports.
Economic Concepts We Will Cover
- Balance of Payments
- Comparative Advantage
- Arguments for Protectionism
- Demand and Supply of Currency
- Purchasing Power Parity (if we have time)
Resources for More Information