Suppose that the U.S. imposes a tariff on imported automobiles. Answer the following questions in words and with a diagram.   (a) What happens to the demand for dollars in the market for foreign-currency exchange?   (b) What happens to the real exchange rate?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose that the U.S. imposes a tariff on imported automobiles. Answer the following questions in words and with a diagram.

 

(a) What happens to the demand for dollars in the market for foreign-currency exchange?

 

(b) What happens to the real exchange rate?

 

(c) What happens to net exports? Why?

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