Explain why economists consider it to be one of the economic functions of government to provide a legal system
What will be an ideal response?
A market economy relies heavily on contracts and property rights. Property rights must be defined and protected if people are going to make investments in resources, and if people are going to exchange assets. Contracts must also be enforced. By providing a legal system, the government can ensure that a market system will function better.
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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.
The U.S. dollar will appreciate if
a. the U.S. demand for foreign exchange decreases b. the U.S. demand for foreign exchange increases c. the U.S. supply of foreign exchange decreases d. Americans want to buy more foreign goods e. foreigners want fewer American goods
The WTO
A) is an affiliate of the World Bank. B) is an organization created to oversee NAFTA. C) was established to resolve trade disputes among member nations. D) provides low interest loans to member nations to help develop their export industries.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States wheat market, ceteris paribus: The federal government restricts the amount of agricultural products that can be imported. (See Figure 29.4.)
A. a. B. b. C. c. D. d.