4. Analyzing the effects of a trade deficitSuppose the U.S. government has just hired you to analyze the following scenario. Assume the U.S. automobile industry grows concerned aboutforeign manufacturers exporting fuel-efficient vehicles to the United States, a practice that harms domestic producers. Industry experts daim thatimplementing a quota on imports would reduce the size of the trade deficit. Complete the following exercise in order to help you 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 quota.REAL EXCHANGE RATE (Units of foreign currency per dollar)SupplyQUANTITY OF DOLLARSDemandGiven this change, the dollarFill in the following table with the effect of a quota on the following items:DemandSupplySupply of Loanable Funds Real Interest RateNational SavingNet ExportsChange due to a quota

Understanding the Scenario:The U.S. government is considering implementing a quota on the import of…

Answered: 4. Analyzing the effects of a trade…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Suppose the U.S. government has just hired you to analyze the following scenario. Assume the U.S. manufacturing industry grows concerned about competition from low-cost producers overseas exporting their goods to the United States, a practice that harms domestic producers. Industry experts claim that implementing a tariff on imports would reduce the size of the trade deficit. Complete the following exercise in order to help you 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. REAL EXCHANGE RATE (Units of foreign currency per dollar) QUANTITY OF DOLLARS Given this change, the dollar Supply Change due to a tariff Demand Fill in the following table with the effect of a tariff on the following items: Demand Supply (?) Supply of Loanable Funds Real Interest Rate Net Capital…
Describe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is occurring in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?
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Identify the relevant economic concept which can be matched to each of the descriptions bel Simply give the question number and the relevant terms/words in each case. Q.1.1 A measure used to control the physical level of imports allowed into a country. Q.1.2 Aggregate income of all permanent residents of a country. Q.1.3 A situation where merchandise exports are greater than merchandise imports. Q.1.4 The ratio between the change in income and the change in autonomous spending. Q.1.5 Household spending that is determined by the level of output and income together with the marginal propensity to consume.
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The US has a National Debt that exceeds $27 trillion and a budget deficit that is well over a trillion dollars. If US decides to cover the budget deficit through money creation (which leads to inflation and dollar depreciation), what are the impacts on: A) Domestic firms that use 100% domestic content and export their products, B) Domestic firms that use less than 100% domestic content that sell exclusively in the US, and C) The consumers who buy goods that have less than 100% domestic content?
The following graph shows the market for euros in terms of dollars. The market is initially in equilibrium at $2.00 per euro and 8 billion euros. Suppose an economic downturn in the United States leads to a drop in American incomes, causing imports from Europe to decline. On the following graph, show the effect in the market for euros of an economic downturn in the United States that leads to a drop in European incomes. DOLLAR PRICE OF EUROS 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 2 Supply of Euros Demand for Euros 4 6 8 10 12 QUANTITY OF EUROS (Billions of euros) 14 Under a system of flexible exchange rates, the dollar will per euro. 16 Increase income taxes in the United States. Lower interest rates by way of monetary policy. Demand for Euros Subsidize the production of certain U.S. exports to Europe. Supply of Euros ? Now suppose that the United States maintains a fixed exchange rate of $2.00 per euro. Which of the following U.S. government policies would keep the balance-of-payments…
II. Trade Accounts. A. The Balance on Goods and Services has been in deficit for years. Assume the U.S. has $400 of goods and services exports. Use a simple flow of trade diagram to illustrate a U.S. Balance on Goods and Services deficit of $50. Foreign. U.S. B. I have argued that the illustration above is incomplete because it requires foreigners to hold American dollars for years and years. This seems unlikely. Use another flow of trade diagram to show how a deficit in the Balance of Goods and Services can be offset somewhere else in the trade accounts. U.S. Foreign. C. A Canadian furniture maker with plants in Canada and the United States, sells $100,000 worth of furniture made in Canada to Americans. They use the money from the sale to purchase $100,000 worth of furniture quality lumber from American suppliers to be used in their Canadian plant. How do these two transactions affect the Balance on Goods and Services? Give a number D. A Canadian furniture maker with plants in…
1. Imports, exports, and the trade balanceThe following table shows the approximate value of exports and imports for the United States from 1997 through 2001.Complete the table by calculating the surplus or deficit both in absolute (dollar) terms and as a percentage of GDP. If necessary, round your answers to the nearest hundredth.YearGDPExportsImportsExports – Imports(Billions of dollars)(Billions of dollars)(Billions of dollars)(Billions of dollars)(Percentage of GDP)19978,332.0 954.41,055.8 19988,794.0 953.91,115.7 19999,354.0 989.31,251.4 20009,952.0 1,093.21,475.3 200110,286.0 1,027.71,398.7 Source: “Income, Expenditures, Poverty, & Wealth: Gross Domestic Product (GDP),” United States Census Bureau, United States Department of Commerce, last modified September 2011, accessed June 10, 2013, https://www.census.gov/library/publications/2011/compendia/statab/131ed/income-expenditures-poverty-wealth.html. Between 1997 and 1998, the in dollar terms and as a percentage of GDP.
Consumers and a fresh round of stimulus money pushed demand for U.S. imported goods to a record high in March, further expanding the trade deficit. The foreign-trade gap in goods and services expanded 5.6% from the prior month to a seasonally adjusted $74.4 billion (Links to an external site.) in March, the Commerce Department said Tuesday. Imports rose 6.3% to $274.5 billion for the month, fueled by higher shipments of items including toys, furniture, cellphones, automobiles and semiconductors. The previous record for imports, on a seasonally but not inflation adjusted basis, was recorded in October 2018 when the U.S. purchased foreign goods and services worth $266.72 billion. Exports rose 6.6% to $200 billion in March, following a one-month decline in February, as supply-chain disruptions caused by winter weather eased. Using the expenditure model what impact will this have on the US GDP? Explain in detail in less than 100 words
1. Notice how U.S. imports rose at roughly the same rate asthose of other countries until the 1970s. What accounts forthe acceleration of U.S. imports thereafter? 2. China’s exports rose spectacularly after the 1990s. Germanyincreased its exports in this period dramatically as well. Whatevidence do you see here for increasing competition for theUnited States in a globalizing economy?
An editorial in the Wall Street Journal in 2017 makes the following observation: "When the US has a current-account deficit it has to have a capital-account surplus of the same amount." Source: "How to Think About the Trade Deficit," Wall Street Journal, March 10, 2017. Briefly explain whether you agree with this observation OA Agree, because the United States must have a capital account surplus of the same size B. Disagree, because the observation confuses the capital account with the financial account OC. Disagree, because the current account and the capital account are unrelated OD. Disagree, because the United States must have a capital account deficit of the same size.

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