QUESTION 5 The most important lesson from trade policy is that if the US wishes
ID: 1102814 • Letter: Q
Question
QUESTION 5 The most important lesson from trade policy is that if the US wishes to decline trade deficit and increase domestic jobs by imposing import quota on foreign products, a. trade deficit would not be reduced, and while the domestic jobs can be saved, jobs in exporting firms in the US will be destroyed. Ob-trade deficit would not be reduced, but jobs in both domestic and exporting firms can be saved. c.trade deficit would be reduced, but jobs in both domestic and exporting firms will be destroyed. d. trade deficit would be reduced, and while the jobs in the exporting firms can be saved, jobs in domestic firms in the U:S will be destroyed.Explanation / Answer
Q5
Trade deficit is when imports are greater than exports. An imposition of import quota on foreign products will tend to increase the production in the country and jobs will be created. However, the other countries will retaliate in the same way and US will end up destroying the jobs in the exporting firms and exports will be reduced . this will leave the deficit at the same level.
The correct option is (a)
Q2:
Incraese in Budget deficit imply that the government is spending more than it can afford and will therefore loan the requirement. As a result the demand for the loanable funds will increase and the interest rate will rise. This will reduce capital outflow and domestic investment because the investment is now costly. Currency depreciates and exports rise.
Thus the correct option is (d).
Q3:
Supply = private saving + public saving + net capital outflow
=100-30-20
=$50 billion
The correct option is (a).