4. Analyzing the effects of a trade deficitSuppose the U.S. government has just hired you to analyze the following scenario. Assume the U.S. agricultural industry grows concerned about theamount of fresh fruit imports to the United States, a practice that harms domestic producers. Industry experts claim that implementing a tariff onimports would reduce the size of the trade deficit. Complete the following exercise in order to help you analyze this claim.The following graph shows the demand and supply of U.S. dollars in a model of the foreign-currency exchange market.Shift the demand curve, the supply curve, or both to show what would happen if the government decided to implement the tariff.REAL EXCHANGE RATE (Units of foreign currency per dollar)SupplyQUANTITY OF DOLLARSDemandDemand-0-SupplyⓇ Given this change, the dollarFill in the following table with the effect of a tariff on the following items:Change due to a tariffDemand for Loanable Funds Real Interest RateNet Capital OutflowNet Exports

It can be defined as a market that is also known as an over-the-counter (OTC) marketplace that…

Siven this change, the dollar Fill in the following table with the effect of a tariff on the following items: Change due to a tariff Demand for Loanable Funds Real Interest Rate Net Capital Outflow Net Exports

Siven this change, the dollar Fill in the following table with the effect of a tariff on the following items: Change due to a tariff Demand for Loanable Funds Real Interest Rate Net Capital Outflow Net Exports

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter4: The Aggregate Economy

Section: Chapter Questions

Problem 5E

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Question

4. Analyzing the effects of a trade deficit
Suppose the U.S. government has just hired you to analyze the following scenario. Assume the U.S. agricultural industry grows concerned about the
amount of fresh fruit imports to the United States, a practice that harms domestic producers. Industry experts claim that implementing a tariff on
imports would reduce the size of the trade deficit. Complete the following exercise in order to help you analyze this claim.
The following graph shows the demand and supply of U.S. dollars in a model of the foreign-currency exchange market.
Shift the demand curve, the supply curve, or both to show what would happen if the government decided to implement the tariff.
REAL EXCHANGE RATE (Units of foreign currency per dollar)
Supply
QUANTITY OF DOLLARS
Demand
Demand
-0-
Supply
Ⓡ

Given this change, the dollar
Fill in the following table with the effect of a tariff on the following items:
Change due to a tariff
Demand for Loanable Funds Real Interest Rate
Net Capital Outflow
Net Exports

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