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Author Question: It is argued that a tariff may help promote employment in a single industry, but is not likely to ... (Read 26 times)

krzymel

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on: Jun 30, 2018
It is argued that a tariff may help promote employment in a single industry, but is not likely to help employment in general. Discuss.
 
  What will be an ideal response?

Question 2

Refer to the figure above. With free trade, the total quantity of imports would equal
 
  A) 10,000 units.
  B) 20,000 units.
  C) 22,000 units.
  D) 30,000 units.


spencer.martell

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Reply #1 on: Jun 30, 2018
Answer to Question 1

A general tariff on all imports is equivalent to a depreciation in the value of the country's currency. It would raise the prices of all imports, and have a considerable income effect. This income effect will have a negative effect on total consumption of the import-competing sector (as well as the exportables and non-tradables). In addition, under conditions of a flexible exchange rate regime (assuming the Marshal-Lerner Conditions hold) it will lower the supply of the country's currency in the foreign exchange market, and hence cause an appreciation of the currency. This will harm the country's exports, and negatively affect this sector's employment.

Answer to Question 2

B


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krzymel

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Reply #2 on: Jun 30, 2018
Thank you :)


spencer.martell

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Reply #3 on: Jun 30, 2018
Happy to help you


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