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Assume the ratio of the value of imported input to the value of the finished good is 0.76 and the nominal tariff rate on an imported final product is 0.20.
(i) If the government wants to achieve an effective rate of protection of 38% what will be the required nominal tariff rate on the imported input?
(ii) If on the other hand, the government wants to achieve an effective rate of protection of 44% what will be the required nominal tariff rate on the imported input?
(iii) Does your answers in (i) and (ii) confirm that lower nominal tariff rate on the imported input yield higher effective rate of protection? Briefly explain your answer.
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Assume exports = 300, imports = 400, tax revenues = 1,100, government purchases = 1,400, private domestic saving = 900. Then the level of private domestic investment is? how do you solve?
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