1. 1 Basics of Foreign Trade and Exchange

2. 2 Why Nations Trade Benefits of Specialization Law of Comparative Advantage Benefits of Diversity Competitiveness –Knowledge-Intensive Products Contributed to a U.S. Export Boom Economies of Scale

3. 3 Free Trade vs. Protectionism Arguments for Protectionism Methods of Protectionism –Tariffs, quotas, subsidies –MFN –International Organizations Seek Cooperation on Trade Issues Arguments for Free Trade Measures of Trade –Trade Surplus, deficit –Current Account, Capital Account –Statistics can have different interpretations

4. 4 Foreign Currency Exchange Market Participants –Banks, Brokers, Central Banks Foreign Exchange Rates –J-curve explains lag between currency depreciation and improvement in the current account Determination of Foreign Exchange Rates –Political instability - U.S. dollar as “safe haven” –Interest rates

5. 5 Foreign Currency Trading Trading between banks Hard & Soft currencies Types of transactions –Spot –Forward –Future –Option

6. 6 Floating and Fixed Exchange Rates Gold exchange standard –Bretton Woods 1944 Beginning of Floating Exchange Rates

7. 7 The Role of Central Banks Intervention –Federal Reserve Bank of New York –European Monetary System –Bank of Japan Concerns about Eurocurrency

8. 8 Working Across Borders Multinational and International companies