Distinction between absolute and comparative advantage - Differentiating between absolute and comparative advantage.

Benefits of specialisation and free trade (trade liberalisation), including the trading possibility curve - Discussing the advantages of specialization and free trade, including the trading possibility curve.

Exports, imports and the terms of trade: - measurement of the terms of trade - causes of changes in the terms of trade - impact of changes in the terms of trade

Limitations of the theories of absolute and comparative advantage - Analyzing the limitations of the theories of absolute and comparative advantage.

Meaning of protectionism in the context of international trade - Defining protectionism as government policies that restrict international trade.

Different tools of protection and their impact: - tariffs - import quotas - export subsidies - embargoes - excessive administrative burdens (‘red tape’)

Arguments for and against protectionism - Discussing arguments in favor of and against protectionism.

Components of the current account of the balance of payments: - current account: trade in goods, trade in services, primary income and secondary income - definition of balance and imbalances (deficit and surplus) in the current account of the balance of payments

Calculation of: - balance of trade in goods - balance of trade in services - balance of trade in goods and services - current account balance (CAB)

Causes of imbalances in the current account of the balance of payments - Analyzing factors that cause current account imbalances.

Consequences of imbalances in the current account of the balance of payments for the domestic and external economy - Discussing the implications of current account imbalances.

Definition of exchange rate - Defining the exchange rate as the price of one currency in terms of another.