In the spring of 2002, the United States imposed tariffs on imported steel to protect the jobs of American steel workers and protect the production of the American steel industry. Why might this policy not work to increase overall employment in the United States?
This type of trade policy is commonly called protectionism. Protectionism is almost always self-defeating for several reasons. First, nations may retaliate by restricting their own imports (as the European Union has threatened to do by limiting European imports of American farm products) and thus reduce U.S. exports. If the U.S. reduces imports, that will reduce the supply of U.S. dollars in the foreign exchange market and increase the exchange rate of the dollar. This appreciation of the dollar will reduce exports and, thereby, defeat the purpose of the import restrictions. In general, protectionist policies will not improve the trade position of the United States but they will increase prices and reduce the efficiency of the U.S. economy. Thus, although some steel industry jobs may be saved, other American employment will be reduced because of reduced foreign demand for U.S. exports. This reduction in U.S. exports will come about because of protectionist retaliation by foreign governments and the appreciation of the U.S. dollar that makes U.S. exports more expensive to foreigners.
You might also like to view...
The view that changes in the money supply is the primary cause of changes in real output and the price level is most closely associated with
A. the monetarist view. B. mainstream economics. C. real business cycle theory. D. rational expectations theory.
Which of the following correctly identifies a Malthusian cycle?
A) Increase in GDP would increase GDP per capita above subsistence, which will cause an increase in the size of population which would increase pressure on resources and eventually reduce GDP per capita. B) Increase in GDP would increase GDP per capita above subsistence, which will cause a decrease in the size of population that would reduce pressure on resources and increase GDP per capita further. C) Decrease in GDP would decrease GDP per capita below subsistence, which will cause an increase in the size of population which would increase pressure on resources and eventually reduce GDP per capita. D) Increase in GDP would increase GDP per capita above subsistence, which will cause an increase in the size of population that would increase pressure on resources and that would further increase GDP per capita.
What is the distinction between expected wealth and expected utility?
What will be an ideal response?
If the dollar depreciates relative to other currencies, which of the following is true?
a. It takes more foreign currency to buy a dollar. b. It takes more dollars to buy a foreign currency. c. U.S. exports will decrease. d. Foreign purchases of U.S. goods will decrease.