Podcast
Questions and Answers
What is the effect of a tariff on consumers?
What is the effect of a tariff on consumers?
- Consumers experience a higher quantity available.
- Consumers receive tariff revenue directly.
- Consumers are hurt due to increased prices. (correct)
- Consumers benefit from lower prices.
Which of the following correctly identifies who benefits from a tariff?
Which of the following correctly identifies who benefits from a tariff?
- The government is helped through tariff revenue. (correct)
- Domestic producers are hurt while consumers benefit.
- Foreign producers benefit from the higher prices.
- Consumers gain from increased import options.
If Japanese automobiles become more popular, what will happen in the foreign exchange market for Yen?
If Japanese automobiles become more popular, what will happen in the foreign exchange market for Yen?
- The exchange rate for Yen will remain unchanged.
- The value of Yen will depreciate against the Dollar.
- The demand for Yen will shift to the left.
- Yen will appreciate in value against the Dollar. (correct)
What occurred to the price of the Norwegian Kroner from Thursday to Friday?
What occurred to the price of the Norwegian Kroner from Thursday to Friday?
How much would you pay for 10 Norwegian Kroner on Thursday if the rate is $0.1752 per Kroner?
How much would you pay for 10 Norwegian Kroner on Thursday if the rate is $0.1752 per Kroner?
Based on the exchange rate change from Mon to Tues for the Kroner, what can be inferred?
Based on the exchange rate change from Mon to Tues for the Kroner, what can be inferred?
What relationship does an increase in tariff generally have on the demand for domestic products?
What relationship does an increase in tariff generally have on the demand for domestic products?
What price level corresponds to the equilibrium under no trade?
What price level corresponds to the equilibrium under no trade?
In the context of free trade, what is the relationship between Q2 and Q1?
In the context of free trade, what is the relationship between Q2 and Q1?
According to the kinked supply curve model, which quantity represents domestic production with tariffs applied?
According to the kinked supply curve model, which quantity represents domestic production with tariffs applied?
What effect do tariffs have on the quantity of imports?
What effect do tariffs have on the quantity of imports?
What is the price level at equilibrium when tariffs are imposed?
What is the price level at equilibrium when tariffs are imposed?
Which quantity directly represents imports in a free trade scenario?
Which quantity directly represents imports in a free trade scenario?
What is a likely outcome of implementing a tariff based on the kinked supply curve?
What is a likely outcome of implementing a tariff based on the kinked supply curve?
What does Q2 represent in the context of free trade?
What does Q2 represent in the context of free trade?
Flashcards
Tariff effect on consumers
Tariff effect on consumers
Tariffs increase the price of imported goods, hurting consumers by raising their costs.
Tariff effect on domestic producers
Tariff effect on domestic producers
Tariffs protect domestic producers by increasing the price of competing imported goods.
Tariff revenue
Tariff revenue
Tariffs generate revenue for the government.
Impact of increased foreign car popularity
Impact of increased foreign car popularity
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Currency appreciation
Currency appreciation
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Currency depreciation
Currency depreciation
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Exchange rate
Exchange rate
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No Trade
No Trade
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Free Trade
Free Trade
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Tariffs
Tariffs
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Domestic Production
Domestic Production
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Imports
Imports
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International Trade
International Trade
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Supply Curve
Supply Curve
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Study Notes
International Trade - Exchange Rates
- International trade lectures cover exchange rates and practice questions, specifically in lecture 2
- Graphs illustrate the relationship between supply and demand curves, domestic production, imports, and tariffs in different trade scenarios
- Different trade scenarios are shown (no trade, free trade, tariffs)
- The effects of tariffs on consumers, domestic producers, and the government are discussed
- Tariffs hurt consumers and benefit domestic producers and the government as these receive tariff revenue.
- Tariffs reduce the quantity of imports.
- If a tariff is added to imported cars from Japan, the demand for American-made cars may increase.
Currency Appreciation
- If Japanese cars become popular, the Yen (Japanese currency) value appreciates relative to the US dollar. This is reflected in a shift to the right of the demand curve for Yen.
- The exchange rate between the US dollar and the Norwegian krone fluctuates
- Currency quotes (e.g., US$ per KR) change over time, and these changes have implications on the cost of goods.
Calculating Costs
- When buying a Volvo (Sweden), you need to understand the effect of exchange rates on the final price.
- Given a price in US dollars and the current exchange rate between US dollars and the Swedish Krona, the price of the Volvo in US dollars, based on the exchange rate, can be calculated.
Foreign Exchange Quotes
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Foreign exchange quotes show the exchange rates between different currencies, for example, the US dollar and the Canadian dollar (USD/CAD).
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The domestic currency is always on the left side of the exchange rate.
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In direct quotes, the base currency is on the left, while the quote currency is on the right.
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