Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134061115
Author: CASE
Publisher: PEARSON
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Question
Chapter 19, Problem 2.1P
Subpart (a):
To determine
The effect on output and employment.
Subpart (b):
To determine
The impact on import.
Subpart (c):
To determine
The demand for Yen.
Subpart (d):
To determine
The effect on employment and output.
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You have just been hired by the U.S. government to analyze the following scenario. Suppose the U.S. agricultural industry is concerned about the level of fruit and vegetable imports to the United States, a practice that hurts domestic producers. Lobbyists claim that implementing a tariff on imports would shrink the size of the trade deficit. The following exercise will help you to analyze this claim.
The following graph shows the demand and supply of U.S. dollars in a model of the foreign-currency exchange market.
Shift the demand curve, the supply curve, or both to show what would happen if the government decided to implement the tariff.
Given this change, the dollar_______ (appreciates/depreciates).
Fill in the following table with the effect of a tariff on the following items:
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?
Q2-8
The simple Marshall-Lerner condition would suggest that one of the following cases would produce a worsening of the trade balance if the country's currency depreciated. Which one?(The negative sign on elasticities is being ignored; also, assume that trade is initially balanced.)
Select one:
a. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.5
b. elasticity of demand for exports = 0.4; elasticity of demand for imports = 0.6
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d. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.1
Chapter 19 Solutions
Principles of Macroeconomics (12th Edition)
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