Effects of a Trade Deficit Assignment | Homework For You

4. Analysing the effects of a trade deficit

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Aa Aa E Imagine the Australian pharmaceutical industry is concerned about foreign prescription drug producers exporting their goods to Australia, a practice that hurts domestic producers. Lobbyists claim that implementing a tariff on imports would shrink the size of the deficit. You have just been hired by the Australian government to analyse this claim. The following graph shows the demand and supply of dollars in a model of the foreign-currency exchange market.


Show what would happen if the government decided to implement the tariff by shifting the demand curve, the supply curve, or both. REAL EXCHANGE RATE Supply Demand QUANTITY OF DOLLARS Given this change, the value of a dollar appreciates depreciates Now that we’ve examined the effect of a tariff on the foreign-currency exchange market, let’s take a look at what happens in the loanable funds market and with some other equilibrium concepts. Fill in the following table with the effect of a tariff on the following items: Change Due to a Tariff Supply of Loanable Funds Real Interest Rate National Savings Net Exports Decrease Increase No change. Get Economics homework help today

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