The impact of increasing imports rather than exports.
Explanation of Solution
Net export is the additional value of export over the imports, which can be calculated by subtracting imports from exports. When the import is greater than exports, it shows
Trade deficit: Trade deficit refers to a situation where the imports of a country are higher than the exports by the country.
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Chapter 25 Solutions
Economics: Principles & Policy
- The graph depicts the market for oil, with the assumption that the United States can import any amount of oil it chooses at the world free trade price. Adjust the graph to reflect what happens when a 50% import tax is imposed on oil. Approximately how many million barrels are imported before the tax is imposed?arrow_forwardYou are given the following information: Quantity of imports 400 Foreign currency price of imports 20 Exchange rate (d/f) 1.50 Calculate the foreign currency and domestic currency values of imports. What will happen if the exchange rate falls to 1.20, assuming that the value of the elasticity of demand for imports is -0.1?arrow_forwardThe economy of Ashville is currently in a macroeconomic equilibrium, as depicted by point E, in the accompanying figure. The main component of Ashville's exports consist of the raw materials that it derives from its natural resources. Suppose that the world demand for raw materials decreases sharply, resulting in a decrease in the price of raw materials throughout the world. The decrease in the world demand for raw materials, which is the major source of Ashville's exports, will the level of aggregate demand in Ashville, causing a ▼shift in the AD curve. The decrease in the world demand for raw materials, which implies a decrease in the level of factor prices, leads to in the unit cost of production in Ashville, causing a 7 shift in the AS curve. Use the three-point curve drawing tool twice to draw and label new AS and AD curves that shows the effect of this shock on Ashville's economy. Carefully follow the instructions above, and only draw the required object. The overall effect of…arrow_forward
- If the United States is currently importing 14 million barrels per day at a world price of $4.00 per unit (the entire amount consumed), what is the effect on imports of a tax equal to $4.00 per unit? 1.) Using the line drawing tool, help determine the quantity of U.S. crude oil imports after the $4.00 per-unit tax by drawing a horizontal line at the price paid by U.S. consumers. Label this line + Tax'. 2.) Using the point drawing tool, determine quantity demanded at the price paid by U.S. consumers after the imposition of the import tax. Label this line 'Pop'. 3.) Using the point drawing tool, determine quantity supplied at the price paid by U.S. consumers after the imposition of the import tax. Label this line "Pas". Carefully follow the instructions above and only draw the required objects. The amount of imports after the $4.00 per-unit tax is million barrels per day. Before the tax, domestic producers supplied 0 barrels of crude oil. They now supply million barrels Price per barrel…arrow_forwardThe graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from AD₁ to AD2, causing the quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion. PRICE LEVEL 170 160 150 140 130 120 110 100 90 0 100 +-+ I I 200 300 400 500 OUTPUT (Billions of dollars) AD1 AD2 600 700 800 ?arrow_forwardEgypt exports of soaps, lubricants, and waxes, to Kenya was US$22.63 Million during 2019, according to the United Nations COMTRADE database on international trade. Egypt exports of soaps witnessed a steady decline since 2017, and there is lots of potential demand in many other african nations for Egyptians soap.Last March 2020 the Ministry of Industry and Trade decided to exclude soap bars, shampoo, and tissue paper in the form of jumbo rolls "production requirements" from Resolution 187 of 2020 to stop the export of masks and protective supplies.Minister of Trade and Industry Nevein Gamea issued two decisions to stop exporting all of the surgical masks ("face masks") and the requirements to prevent infection and alcohol of all kinds and derivatives, for a period of 3 months starting from the date of publishing the decisions in the Egyptian Gazette.H.E. Mrs. Gamea said that these two decisions aim to provide the needs of the Egyptian citizen with these products, especially in light of…arrow_forward
- In Italy, build an argument for increasing exports (imports) of some category of goods or services from (into) this country.arrow_forwardThe graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from AD to AD₂, causing the quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion. PRICE LEVEL 170 160 150 140 130 120 110 100 8 90 0 100 AD₁ AD₂ 200 300 400 500 600 OUTPUT (Billions of dollars): 700 800 ?arrow_forwardIf the world price of a good is lower than its domestic equilibrium price, the country will:arrow_forward
- An expected decline in demand for consumer goods in the U.S. means there will be less imports into the U.S. Less imports in the U.S. translates to a reduction in exports from China, which is significant as the U.S. has the largest GDP of all nations. As the U.S. is reducing imports, it will be purchasing less goods from China, which means the U.S. will be giving up less dollars to purchase Chinese goods with the yuan. Will a decline in demand for consumer goods in the U.S. impact China's economy given the above information? If so, how would that affect the dollar-yuan exchange rate?arrow_forwardSuppose there is an increase in the demand of the imported commodity subject to a given import quota, determine whether each of the following statements is true, false, or uncertain. Statement I – There will be no change in the quantity of the commodity consumed. Statement II – There will be an increase in the domestic price of the commodity.arrow_forwardProblem #3. Suppose the official price of 1 ounce of gold in the US is 21.60 dollars and the official price of gold in the UK is 3.5 pounds sterling. 3A. Assuming no transport costs, the value of 1 pound sterling is US dollars. Now suppose there are transport costs for shipping gold from one market to another. The value of one currency in terms of another will no longer be constant; instead, it can fluctuate within a range. These we referred to as gold points. If the exchange rate should fall outside of this range, gold will be snipped from one market to another. Assume that it costs 5% of the purchase price (paid by the buyer) to ship gold from one market to O another. 3B. The lower value of 1 pound sterling in terms of the dollar in this range will be and the wor upper value of this range will be Show your work and explain your answer below.arrow_forward