Example6answer

Example6answer - ECON460001and002,Fall2010

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ECON 460 -001 and 002, Fall 2010 Example 6 – Some important concepts on Interventionist Trade Policies Chapter 15: Pages 319-343 Argument Trade policy  Policy as per “Specificity  Principle” Source of Government  Revenues Taxes and Tariffs Broaden Tax base National Defense  Tariffs and Quotas Production Subsidy (prohibitive tariff if foreign  goods have to completely  restricted) Improve Trade Balance Tariffs and Quotas Y=C+I+G+NX Reduce C or increase Y. Currency depreciation if Y is  not at full employment  The TOT argument Tariffs If TOT is the main argument,  then this is the best policy. Decrease Unemployment Tariffs and Quotas to restrict  imports Use fiscal and monetary policy  to increase output and  employment. Increase employment in a  specific industry Tariffs and Quotas Production Subsidy Tariff to Benefit a Scarce  Factor of Production. Tariffs and Quotas
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Example6answer - ECON460001and002,Fall2010

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