The deadweight loss of a tariff A) is a social loss because it ...

[humphriesbr@me.com]

The deadweight loss of a tariff
 
  A) is a social loss because it promotes inefficient use of national resources.
  B) is a social loss because it reduces the revenue of the government.
  C) is not a social loss because it merely redistributes revenue from one sector to another.
  D) is not a social loss because it is paid for by rich corporations.
  E) is not a social loss because it aids domestic consumers.

Question 2

Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of a temporary increase in the European money supply on the dollar/euro exchange rate.
 
  What will be an ideal response?

[peilian]

Answer to Question 1

A

Answer to Question 2

An increase in the European money supply will reduce the interest rate on the euro and thus will cause the schedule of the expected euro return expresses in dollars to shift down, causing a reduction in the dollar/euro exchange rate, i.e., an appreciation of the U.S. Dollar. The euro depreciates against the dollar. The U.S. money demand and money supply are not going to be affected, and thus the interest rate in the U.S. will remain the same.

[humphriesbr@me.com]

TYSM

[ryansturges]

Excellent