Explain three ways in which imposing a quota on imports may reduce a country's overall economic well-being
What will be an ideal response?
1. Quotas discourage lower-cost imported goods in favor of higher-cost domestic goods and therefore raise prices to consumers. Some of these consumers get priced out of the market and instead by goods they do not like as well.
2. Quotas encourage producers to enter or stay in protected industries, where productive resources would be better used in other industries.
3. Because exports pay for imports, quotas that discourage imports will also reduce exports, damaging the producers of those exports. Also, quotas might encourage retaliation by foreign countries, further damaging domestic exporters.
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Unemployment increases when
A) an inflationary gap is created. B) potential GDP increases. C) the government decreases its expenditure on goods and services. D) aggregate demand increases. E) aggregate supply increases.
Based on Figure 6.1, given a tariff of $0.25 per bushel on soybean imports, how much will domestic production increase?
A) Domestic firms will increase output by 10 million bushels. B) Domestic firms will increase output by 20 million bushels. C) Domestic firms will increase output by 70 million bushels. D) Domestic firms' production will not be changed by the tariff.
The quantity of reserves held by a bank in addition to the legally required amounts is known as:
a. actual reserves. b. excess reserves. c. the required reserve ratio. d. the money multiplier. e. the monetary base.
If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?
A. Increase the inventory. B. Keep it the same. C. Get into the beef business. D. Decrease the inventory.