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1. Use your knowledge about trade policy to evaluate each of the following statements (true, false, and explain): a. “An excellent way to reduce unemployment is to enact tariffs on imported goods.” The statement is false because tariff policy do not effects the unemployment rather business cycle and the issues prevailing in labor market directly affects the unemployment.
The cumulative effect is all the same. b. “Tariffs have a more negative effect on welfare in large countries than in small countries.” False, the opposite is true because tariffs by large countries can actually trim down world prices which helps offset their effects on consumers. c. “Automobile manufacturing jobs are headed to Mexico because wages are so much lower there than they are in the United States. As a result, we should implement tariffs on automobiles equal to the difference between US and Mexican wage rates.” False, the end result of policy might be increased production in the United States of America and decreased production in Mexico. But it will increase the selling price of the automobiles in USA and would negatively affect the welfare or people and consumer surplus. So there would be only dead weight that comes from consumption and the protection effects. 2. Recently, the United States has taken action to restrict imports of certain Chinese goods, such as toys containing lead and seafood that does not meet health standards, in order to protect US consumers. ...
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