Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 32, Problem 6PA
To determine
The impact of subsidy on net exports and real exchange rate.
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You work for a Nova Scotia Company trying to successfully enter the cranberry market in Australia. Analyze the entry country (Australia) based on the following;
What are the major exports, dollar value, and trends? What are the major imports, dollar value, and trends? Does the entry country have a surplus or deficit for trade? What are the exchange rates? Are there any restrictions on currency trade?
You should also consider sweat shops, skilled labor, employee unrest, political and social activists and labor unions in your analysis.
The value of dollars in the market for foreign-currency exchange (falls, rises) as a result of this export subsidy.
True or False: The export subsidy reduces the trade deficit.
Suppose the US goes into a recession where the economy is not growing very quickly (or is actually shrinking) while the economies of our trading partners remain strong. What will most likely happen to our trade deficit? In your answer, explain what will happen to US exports and US imports and why.
Chapter 32 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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Similar questions
- Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?arrow_forwardIn recent decades, has the U.S. trade balance usually been in deficit, surplus, or balanced?arrow_forwardExchange Rate Effects on Trade Explain why a stronger dollar could enlarge the U.S. balance-of-trade deficit. Explain why a weaker dollar could affect the U.S. balance-of-trade deficit.arrow_forward
- How will currency appreciation make imports cheaper and exports more expensive, causing the trade deficit of America to expand?arrow_forwardOver the past four years, the US trade deficit has increased to $576.9 billion. Based on your understanding of what it means to have a trade deficit, is this number too large? Why or why not? What are the implications for the short-term and long-term US economy?arrow_forwardHow a devaluation may reduce the trade deficit of a country? What condition is required to reduce trade deficit? If this condition is not met , what type of effect may arise?arrow_forward
- What is a trade deficit? a) When a country exports more goods than it imports b) When a country's imports and exports are balanced c) When a country imports more goods than it exports d) When a country has no international tradearrow_forwardHow do you think a fluctuation in foreign exchange rates affect trade?arrow_forwardIf the two countries were both to benefit from trade, what's the possible range of the exchange rate, expressed in units of wine per unit of bread? Explain briefly.arrow_forward
- A case study in the chapter analyzed purchasing-power parity for several countries using the price of Big Macs. Here are data for a few more countries: For each country, select the predicted exchange rate of the local currency per U.S. dollar. (Hint: Recall that the U.S. price of a Big Mac was $4.93.) Price of a Big Mac Predicted Exchange Rate Actual Exchange Rate Country Chile 2,100 pesos 715 pesos/$ 900 forints 293 forints/$ 75 korunas 25.1 korunas/$ 13.5 real 4.02 real/$ 5.84 C$ 1.41 C$/$ Hungary Czech Republic Brazil Canada According to purchasing-power parity, the predicted exchange rate between the Hungarian forint and the Canadian dollar is dollar. However, the actual exchange rate is forints per Canadian dollar. forints per Canadianarrow_forwardDefine the term TRADE DEFICITarrow_forwardHow can the United States improve trade deficit? Give three solutions.arrow_forward
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