As the result willingness to pay by international community

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4) Assume that the country of Iran is a small, open economy. George W. Bush's inclusion of Iran as a member of "the Axis of Evil," however, has complicated trade with Iran. Assume that every good coming out of Iran is subject to a "Terrorism Tariff" that makes every quantity of exports effectively more expensive to any nation that buys them. As a result, the willingness to pay by the international community for every quantity of exports from Iran is lower. Explain what happens to savings, investment, net exports, the interest rate, and the exchange rate.

Reference no: EM13390127

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