Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 16, Problem 13CQ
To determine
The impact of the imports on Country A’s economy.
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Microeconomics: Private and Public Choice (MindTap Course List)
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- Answer the given question with a proper explanation and step-by-step solution. Suppose that εD = 0.70 and ε_D^F = 0.50 for a given country: Suppose that the foreign currency price of this country’s exports falls by 18% following a devaluation. What will happen to the quantity of exports?arrow_forwardState whether each of the following events involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy: a. Mexico imports services from Japan b. Mexico exports goods to Canada c. U.S. investors receive a return from past financial investments in Mexicoarrow_forwardAn expected decline in demand for consumer goods in the U.S. means there will be less imports into the U.S. Less imports in the U.S. translates to a reduction in exports from China, which is significant as the U.S. has the largest GDP of all nations. As the U.S. is reducing imports, it will be purchasing less goods from China, which means the U.S. will be giving up less dollars to purchase Chinese goods with the yuan. Will a decline in demand for consumer goods in the U.S. impact China's economy given the above information? If so, how would that affect the dollar-yuan exchange rate?arrow_forward
- Suppose Americans suddenly develop a strong taste for Canadian whiskey. What happens to the demand for Canadian dollars in the foreign exchange market? What happens to the value of Canadian dollars in the foreign exchange market? What about U.S. dollars? What happens to the quantity of net exports in Canada, other than whiskey, as a result of your answer in part b? What about the U.S.?arrow_forwardWhich of the following would increase exports in the United States? The United States purchases 500 silver necklaces from Mexico. The government of Mexico purchases 500 Ford F-150 pickup trucks from the United States. A Mexican citizen purchases 25 shares of stock in Ford Motor Company. The U.S. government donates $5 million to Mexico to help victims of drought in Mexico.arrow_forwardConsider a small country that is closed to trade, so its net exports are equal to zero. The following equations describe the economy of this country in billions of dollars, where C is consumption, DI is disposable income, I is investment, and G is government purchases: C� = = 30+0.8×DI30+0.8×DI G� = = 5050 I� = = 6060 Initially, this economy had a lump sum tax. Suppose net taxes were $50 billion, so that disposable income was equal to Y – 50, where Y is real GDP. In this case, this economy's aggregate output demanded was ___________ . Suppose the government decides to increase spending by $10 billion without raising taxes. Because the spending multiplier is ____________ , this will increase the economy's aggregate output demanded by ____________ . Now suppose that the government switches to a proportional tax on income of 10%. Because consumers retain the remaining 90% of their income, disposable income is now equal to 0.90Y. In this case, the economy's aggregate output…arrow_forward
- Which of the following will result in a surplus in the BOP? Select one: a. Capital Outflows greater than inflows b. Higher exchange rates c. Reduced trade barriers d. Lower inflation levels e. Imports exceed exportsarrow_forwardIf the demand for a country's exports falls at the same time that tariffs on imports are raised, will the country's currency tend to appreciate or depreciate in the long run?arrow_forwardWhich of the following are myths about the U.S. economy? Check all that apply. A. The United States is a relatively closed economy. B. Chinese imports account for less than 20% of all imports into the United States. C. Federal government jobs have grown rapidly over the past few decades. D. Business profits account for roughly one-third of the price Americans pay for typical goods and services.arrow_forward
- If the federal government is running a surplus, the surplus becomes a source of funds for the economy private savings will decrease the current account must be negative taxes must fallarrow_forward• A series of natural disasters occurs that causes the following changes in the U.S. economy: The real gross domestic product drops by 4 percent. The inflation rate rises from 5 percent to 10 percent. Unemployment increases from 6 percent to 10 percent. Suppose that the federal government, holding taxes constant, increases its spending and the Federal Reserve increases its purchases of bonds. Explain how exports and imports will be affected by the changes in output and prices resulting from the policies described.arrow_forwardExplain why you agree or disagree with the following statements: A nation whose interest rate is rising more rapidly than interest rates in other nations can expect the international value of its currency to appreciate.arrow_forward
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