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?
What will be an ideal response?
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.
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There is concern among economists who favor free trade that some regional agreements may promise free trade, but actually act as a way for the countries within the regional agreement to try to ________ trade from anywhere else.
a. support b. encourage c. eliminate d. limit
Which of the following statements about agriculture in the U.S. is correct?
a. Technological improvements typically increase both supply and revenue for individual farmers. b. Technological improvements that increased supply, coupled with inelastic demand for foodstuffs, explain why the number of farmers has decreased dramatically over the last century. c. Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology. d. All of the above are correct.
If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will
a. earn zero profits. b. earn positive profits, causing other firms to enter the industry. c. earn negative profits, causing the firm to exit the industry. d. minimize costs in order to lower the price that it charges.
Explain why monetary policy is needed specifically with regard to the existence of excess reserves. Compare and contrast the effectiveness of monetary policy during the Great Depression and the Great Recession?
What will be an ideal response?