An export subsidy has the opposite effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the domestic terms of trade
A production subsidy for the export product will lower the local price of the export good, lowering the domestic terms of trade for the country. Hence the export subsidy and the import tariff have the same effect. This analysis seems to contradict the first sentence in this paragraph. Discuss this paradox.
While this (Lerner) equivalence may well occur domestically, internationally the tariff will improve a country's terms of trade. An export subsidy on the other hand will in fact lower the international price of the (now readily available) export good, hence hurting a country's terms of trade.
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A) 10.2 percent. B) 13.8 percent. C) 12.2 percent. D) 16.8 percent.
Were the government to decree that henceforth all wages and other input prices are to be indexed to nominal aggregate demand, this ________ "coordination failure" of the macroeconomy and ________ business cycles
A) solves the, amplifies B) solves the, dampens C) creates a, amplifies D) creates a, dampens
Profit maximization is
A. the only motive of any firm’s management. B. a behavioral assumption to simplify analysis. C. the same as satisficing. D. a literal description of a firm’s behavior.
A rate of inflation that exceeds the growth rate of money for a country could be explained by:
A. a decreasing velocity of money. B. a growing real economy. C. a constant velocity of money. D. an increasing velocity of money.