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A Teaching Topic in Economic Analysis 


This topic explores mutually beneficial trade between jurisdictions due to comparative advantage. It examines matters surrounding free trade agreements and the institutions that facilitate such agreements. This topic explores the policy implications of trade deficits and surpluses.

Topic Learning Outcome: Appropriately utilize and interpret results of applying trade theory to the analysis of public policy and management problems. 

Core Concepts associated with this Topic: Fixed Exchange Rate; Floating Exchange Rate; Net Exports; Open Economy; Trade Deficit; Trade Surplus; Net Capital Outflow (NCO); Tariff.

Recommended Reading

NYU Wagner: GP-1018

Krugman, Paul and R. Wells, Microeconomics, 3rd edition. London: Worth Publishers, 2012. Chapter 8 (p. 218 onward).


Sample Assessment Questions:

1.) What are trade deficits and trade surpluses? Is it necessarily a problem if a country has a trade deficit with respect to its trade with any other specific country? Is a trade deficit necessarily a problem for a jurisdiction?

2.) What is the difference between a fixed and floating exchange rate?

3.) What is currency manipulating? Why does currency manipulation sometimes interfere with open trade?

4.) What is a tariff? Please explain using an example.

Page updated by Sean Goertzen and Ben Eisen on 16 April 2015.


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© University of Toronto 2008
School of Public Policy and Governance