a. In September 1995, Patrick Buchanan, a Republican candidate for president, proposed a 10 percent tariff on Japanese imports to the United States, a 20 percent tariff on Chinese imports to the United States, and an unspecified "social" tariff on imports from developing countries. Use the long run model of a small open economy to graphically illustrate the impact of these trade policies on the U.S. exchange rate and the trade balance. Assume that the country starts from a position of trade balance. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the new longrun equilibrium values. b. Based on your graphical analysis, explain the predicted impact of Mr. Buchanan's proposed policies. Specifically state what happens to the exchange rate, the trade balance, the volume of imports, and the volume of exports. Please show the graph while describing each piece.

a. In September 1995, Patrick Buchanan, a Republican candidate for president, proposed a 10 percent tariff on Japanese imports to the United States, a 20 percent tariff on Chinese imports to the United States, and an unspecified "social" tariff on imports from developing countries. Use the long run model of a small open economy to graphically illustrate the impact of these trade policies on the U.S. exchange rate and the trade balance. Assume that the country starts from a position of trade balance. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the new longrun equilibrium values. b. Based on your graphical analysis, explain the predicted impact of Mr. Buchanan's proposed policies. Specifically state what happens to the exchange rate, the trade balance, the volume of imports, and the volume of exports. Please show the graph while describing each piece.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 8PA

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