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How do tariffs and quotas differ? Can you think of any reason why foreign producers might prefer a quota rather than a tariff? Explain your answer. It is often alleged that Japanese producers receive subsidies from their government permitting them to sell their products at a low price in the U.S. market. Do you think […]

How will the purchases of items from foreigners compare with the sales of items to foreigners when the foreign exchange market is in equilibrium? Explain. Will a flexible exchange rate bring the imports of goods and services into balance with the exports of goods and services? Why or why not?

As U.S. trade with low-wage countries like Mexico increases, will wages in the United States be pushed down? Why or why not? Are low-wage workers in the United States hurt when there is more trade with Mexico? Discuss. “Tariffs not only reduce the volume of imports, they also reduce the volume of exports.” Is this

Does international trade cost Americans jobs? Does interstate trade cost your state jobs? What is the major effect of international and interstate trade?  “The United States is suffering from an excess of imports. Cheap foreign products are driving American firms out of business and leaving the U.S. economy in shambles.” Evaluate this view.

If foreigners have confidence in the U.S. economy and therefore move to expand their investments in the United States, how will the U.S. current-account balance be affected? How will the exchange-rate value of the dollar be affected?12. Is a trade surplus indicative of a strong, healthy economy? Why or why not?

Suppose that the United States were running a current-account deficit. How would each of the following changes influence the size of the current-account deficit? a. a recession in the United States b. a decline in the attractiveness of investment opportunities in theUnited States c. an improvement in investment opportunities abroad10. If taxes imposed on personal

Explain why the current-account balance and capital-account balance must sum to zero under a pure flexible rate system. Rapidly growing strong economies often experience trade deficits, whereas economies with sluggish growth often have trade surpluses. Can you explain this puzzle?

How do taxes influence the efficiency of resource use? How much does it cost for the government to raise an additional dollar (or $1billion) of tax revenue? During the past five decades, there has been a shift in the composition of the federal budget toward more spending on income transfers and health care and a

“Changes in exchange rates will automatically direct a country toa current-account balance under a flexible exchange rate system. “Is this statement true or false? Several members of Congress have been highly critical of Japan and China because U.S. imports from these countries have persistently been substantially greater than our exports to them. a. Under a

Congress is currently considering legislation that would increase both the tax on dividends and the tax on capital gains derived from the appreciation of assets. How would an increase in the tax rate applied to dividends and capital gains income affect stock prices? Why?