Answer the below three questions. Use the note for reference or please include the citation: No Chat GPT answers

2 How will an import quota on sugar affect (a) the price of sugar produced and sold domestically, (b) sugar produced domestically and sold abroad?

3If a tariff is imposed on imported autos and the domestic demand for autos rises, what will happen to auto imports? If a quota is imposed on imported autos and the demand for autos increases, what will happen to auto imports

6 "Tariffs on imported textiles increase the employment opportunities and incomes of domestic textiles workers. They, therefore, increase aggregate employment and income." Evaluate this statement.

7 Because the balance of payments must always balance, how can a disequilibrium situation occur?

The key takeaways from Chapter 5 are the following:

1 Trade can be mutually beneficial so long as the traders specialize in the production of the good(s) in which they have a comparative advantage. That is to say, even a trader who is less productive than everyone else in everything can find trade beneficial.

2 Generally speaking, tariffs and quotas reduce the aggregate real incomes of the countries that impose them, as well as the countries that are subject to them, because they deny mutually beneficial trades.

3 Those industries protected by tariffs and quotas can gain from them, but only at the expense of consumers who must pay higher prices for the protected goods and at the expense of exporters who are not able to export as much as they would without the trade protections.

Chapter 5 Key Terms

Terms of tradeTheterms of tradeis the ratio at which one commodity can be traded or exchanged for another commodity internationally; or, on an aggregate basis, it is the ratio of the price of exports to the price of imports.

TariffAtariffis a special tax or duty on imported goods that can be a percentage of the price (ad valoremduty) or a specific amount per unit of the product (specific duty).

International exchange rateTheinternational exchange rateis the price of one national currency (such as the euro) stated in terms of another national currency (such as the dollar). In other words, the international exchange rate is the dollar price you must pay for each euro you buy.

DepreciationAdepreciationof a national currency, such as the dollar, is a reduction in its exchange value or purchasing power, brought about by market forces, in relation to other national currencies.

Free exchange rate systemAfree exchange rate systemis one in which the prices of all national currencies in terms of other national currencies are determined by the unfettered forces of the supply of and demand for national currencies.

Fixed exchange rate systemAfixed exchange rate systemis one in which the prices of currencies are established and maintained by government intervention. Under such systems, governments become active traders in their currencies.