Country imposes a countervailing tariff

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Q. Suppose that one country subsidizes its exports and the other country imposes a "countervailing" tariff that offsets this effect, so thatin end relative pricesin second country are unchanged. What happens to the terms of trade? What about welfarein two countries? Suppose, on the other hand, that the second country retaliates with an export subsidy of its own. Contrast the result.

If the consumption function: C = $350 + 0.9Yd

a) At what level of income does savings equal zero?

b) If this economy's disposable income were $4,000, what would be its consumption and savings?

Reference no: EM136239

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