EBK MACROECONOMICS
EBK MACROECONOMICS
5th Edition
ISBN: 8220106773925
Author: KRUGMAN
Publisher: MAC HIGHER
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Chapter 18, Problem 14P
To determine

Concept Introduction:

Appreciation of Currency:

It is referred as the rise in the value of a currency in comparison to other currencies. Consider a situation in which the value of one dollar is equal to INR 50. When it becomes equal to INR 60, it means the dollar has appreciated in comparison to INR.

Depreciation of Currency:

It is referred as the reduction in the value of a currency in comparison to other currencies. Consider a situation in which the value of one dollar is equal to INR 50. When it becomes equal to INR 40, it means the dollar has depreciated in comparison to INR.

Effect on the value of the U.S. dollar in each given case.

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The figure below shows the hypothetical domestic supply and demand for baseball caps in the country of Spain. Domestic Supply and Demand for Baseball Caps Price (€ per cap) 10 9 8 7 6 5 4 3 2 1 0 Spain Dd 10 20 30 40 50 60 70 80 90 100 Baseball caps (thousands per month) Suppose that the world price of baseball caps is €2 and there are no import restrictions on this product. Assume that Spanish consumers are indifferent between domestic and imported baseball caps. Instructions: Enter your answers as whole numbers. a. What quantity of baseball caps will domestic suppliers supply to domestic consumers? thousand b. What quantity of baseball caps will be imported? thousand Now suppose a tariff of €1 is levied against each imported baseball cap. c. After the tariff is implemented, what quantity of baseball caps will domestic suppliers supply to domestic consumers? thousand d. After the tariff is implemented, what quantity of baseball caps will be imported? thousand
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