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Welfare Effects of Tariff can be understood as follows:
It is important to understand what the welfare effects for the tariff are. While a tariff might seem desirable because it generates revenue, and might help in protecting domestic producers, it can often leave the domestic consumers quite worse off. This is because domestic producers only have to compete with the higher price of the imported goods, not with the actual price of those goods are being produced at. Thus the domestic consumers in a way are forced to consume the goods produced by less the efficient domestic producers.
Q. It is probable that trade based on external scale economies can leave a country worse off than it could have been without trade. Illustrate how this could happen. Answer:
derive the eqilibrium equation for the trade balance
Q. Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rat
Opportunity cost theory
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Explain why the exchange rate model based on PPP is a long-run theory. Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for the reason
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