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PP_Slides_Class_25_Wednesday_April_16

# PP_Slides_Class_25_Wednesday_April_16 - Good Morning Class...

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Good Morning!! Class 25 Wednesday, April 16

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1. Which formula is correct? a. (nominal amount * real amount) *100 = CPI b. (real amount / nominal amount) * 100 = CPI c. (nominal amount * CPI) = real amount d. (nominal amount / CPI) * 100 = real amount
(\$24,000 / 51.63) * 100 = \$46,484 \$24,000 in 1986, the amount of damage 51.63 CPI for Feb 1986 in Feb 2008\$ \$46,484 the 1986 amount of damage in Feb 2008\$

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All the same: (nom GDP / real GDP) * 100 = GDP defl (nom GDP / GDP defl) * 100 = real GDP (nom am’t / real am’t) * 100 = CPI (nom am’t / CPI) * 100 = real am’t
until World War I, tariff was the U.S. main source of federal revenue prior to the end of World War II, average tariff was 40%, now down to 4% quotas generate no federal (tax) revenue

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U.S. Tariffs, 1820-2005
Tariff affects all foreign sellers equally: efficient foreign producers can pay the tariff more easily than the inefficient foreign producers Quotas affect foreign sellers differentially: this may allow inefficient foreign producers to export at a lower price than efficient foreign producers

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2. A balance of trade deficit exists when a. net exports are negative b. net exports are positive c. exports equal imports d. exports exceed imports
U.S. Balance of Trade - before 1975 usually had trade surpluses - since 1975 had increasing trade deficits Overall balance of trade deficit Services balance of trade surplus Goods balance of trade deficit

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U.S. Balance of Trade (billions of dollars)
U.S. Balance of Trade, 2005

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3. If the dollar rises in value against other currencies, this will a. lower our trade deficit b. make our exports more expensive and our imports cheaper c.
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