Dominick Salvatore is Distinguished Professor of Economics at Fordham University, where he has taught for over 30 years. He is the author of numerous influential textbooks and has advised governments and international organizations on trade and development policy worldwide.

Ralf Hepp is Associate Professor of Economics at Fordham University. His research focuses on international macroeconomics, exchange rates, and monetary policy.

1 Introduction 1

Part 1 International Trade Theory

2 The Law of Comparative Advantage 29

3 The Standard Theory of International Trade 53

4 Demand and Supply, Offer Curves, and the Terms of Trade 79

5 Factor Endowments and the Heckscher-Ohlin Theory 101

6 Economies of Scale, Imperfect Competition, and International Trade 142

7 Economic Growth and International Trade 172

Part 2 International Trade Policy

8 Trade Restrictions: Tariffs 201

9 Nontariff Trade Barriers and the New Protectionism 233

10 Economic Integration: Customs Unions and Free Trade Areas 273

11 International Trade and Economic Development 301

12 International Resource Movements and Multinational Corporations 331

Part 3 The Balance of Payments, Foreign Exchange Markets, and Exchange Rates

13 Balance of Payments 363

14 Foreign Exchange Markets and Exchange Rates 382

15 Exchange Rate Determination 417

Part 4 Open-economy Macroeconomics and the International Monetary System

16 The Price Adjustment Mechanism with Flexible and Fixed Exchange Rates 453

17 The Income Adjustment Mechanism and Synthesis of Automatic Adjustments 481

18 Open-Economy Macroeconomics: Adjustment Policies 508

19 Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply 546

20 Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination 571

21 The International Monetary System: Past, Present, and Future 606

Answers to Selected Problems Glossary of Key Terms G- 1

Name Index I- 1

Subject Index I- 1