You have just been hired by the U.S. government to analyze the following scenario. Suppose the U.S. manufacturing industry is concerned aboutcompetition from overseas low-cost producers exporting their goods to the United States, a practice that hurts domestic producers. Lobbyists claimthat 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.SupplyDemandSupplyDemandQUANTITY OF DOLLARSGiven this change, the dollarFill in the following table with the effect of a tariff on the following items:Supply of Loanable FundsReal Interest RateNet Capital OutflowNet ExportsChange due to a tariffREAL EXCHANGE RATE (Units of foreign currency per dollar)

Answered: he demand curve, the supply curve, or…

he demand curve, the supply curve, or both to show what would happen if the government decided to implement the tariff. Supply Demand Supply Demand QUANTITY OF DOLLARS this change, the dollar

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

You have just been hired by the U.S. government to analyze the following scenario. Suppose the U.S. manufacturing industry is concerned about
competition from overseas low-cost producers exporting their goods 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.
Supply
Demand
Supply
Demand
QUANTITY OF DOLLARS
Given this change, the dollar
Fill in the following table with the effect of a tariff on the following items:
Supply of Loanable Funds
Real Interest Rate
Net Capital Outflow
Net Exports
Change due to a tariff
REAL EXCHANGE RATE (Units of foreign currency per dollar)

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