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Economic theory

The global economy

Trade, exchange rates, the balance of payments and development.

Start: Absolute and comparative advantage

The 10 modules

Each module teaches one idea: a definition, how it works, and questions through the page. Take them in any order.

1Absolute and comparative advantageWork out which country has the comparative advantageCalculation · 6 min · Free 2Why countries tradeExplain how both countries gain from specialising and tradingHow it works · 6 min 3TariffsShow what a tariff does to price, quantity and welfareDiagram · 7 min 4Quotas and non-tariff barriersTell a tariff from a quota and from a non-tariff barrierTell them apart · 6 min 5The balance of paymentsSay what the current account records and what a deficit meansConcept · 7 min 6Floating and fixed exchange ratesTell a floating exchange rate from a fixed oneTell them apart · 6 min 7How a weaker currency reaches a shop priceFollow a fall in the exchange rate through to what a shopper paysHow it works · 6 min 8Trade blocs and the WTOTell the stages of economic integration apartConcept · 7 min 9Measuring developmentWork out an HDI-style measure and say what it adds to GDPCalculation · 7 min 10Is globalisation good for developing economies?Weigh the case each way on globalisation and developmentDebate · 6 min