Reverse effect on terms of trade, International Economics

Assignment Help:

Q. An export subsidy has the reverse effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the domestic part of trade. A production subsidy for the export product will lower the local price of the export good, lowering the domestic parts of trade for the country. Therefore the export subsidy and the import tariff have the same effect. This analysis seems to contradict the first sentence in this paragraph. Discuss this paradox.

Answer: While this (Lerner) correspondence may well take place domestically or internationally the tariff will get better a country's terms of trade. An export subsidy on the other side will in fact lower the international price of the now readily available export good therefore hurting a country's terms of trade.

2144_reverse effect on terms of trade.png


Related Discussions:- Reverse effect on terms of trade

Unrealized gains from trade, Q. Explain why large interest rate differences...

Q. Explain why large interest rate differences would be strong evidence of unrealized gains from trade. Answer: The difference between offshore and onshore interest rates on

Heckscher-ohlin theory, Q. Countries do not in fact export the goods the H...

Q. Countries do not in fact export the goods the H.O. theory predicts. Discuss. Answer: This statement isn't true that though one may find several cases where it seems to be

Swot analysis, The IMC strives to understanding patients' needs before unde...

The IMC strives to understanding patients' needs before understanding the markets. When patients arrive at IMC, they become part of a long tradition of distinguished health care. T

Explain critical appraisal of chamberlins theory, Q. Explain Critical Appra...

Q. Explain Critical Appraisal of Chamberlins theory? a. Chamberlin assumed that monopolist competitors act independently and their price manicuring goes unnoticed by the rival

Open international market, Q. The U.S. is most probably the most open inte...

Q. The U.S. is most probably the most open international market among the industrialized countries. What then does the U.S. have to took by joining the WTO? Answer: There ar

NET BARTER TERMS OF TRADE OR COMMODITY TERMS OF TRADE, TERMS OF TRADE MEAN...

TERMS OF TRADE MEANING AND NET BARTER TERMS OF TRADE MEANING TABLE DIAGRAM

Define foreign direct investment, 1. Explain why many Asian countries set u...

1. Explain why many Asian countries set up Export Processing Zones and why China set up Special Economic Zones. What are the similarities and differences between EPZs and SEZs?

Describe forms of capital inflow to finance external deficit, Q. Describe a...

Q. Describe alternative forms of capital inflow to finance external deficits and explain why these methods were used in different times? Answer: The capital inflows to facili

Trams of trade, different between her barter terms of trade and net barter ...

different between her barter terms of trade and net barter terms of trade

Reciprocal demand, Offer curves with example and explabation

Offer curves with example and explabation

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd