Econ Final Essay - Seth Braunstein Intro to Macroeconomics...

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Seth Braunstein Intro to Macroeconomics The newspaper article written by correspondent Marc Heller, of The Times Washington, on January 28, 2010 reports on the effects of a tariff for bringing New York State wine over the border into Ontario . In this article, Heller explains how a Canadian tariff on imported wines impacts the fast-growing wine industry in upstate New York . While residents of Ontario frequently travel to New York wineries for tastings, they rarely buy bottles of wine to bring back home because of the tariff . The imposition of this tariff has created a serious issue for New York State Senator Schumer, who is forced to watch his state’s wine revenue take a hit due to Canadian tariffs and has been trying to find a solution to this problem . The main point of this article is that the Canadian government has placed a tariff on imported wine in hopes to keep wine sales domestic, and thus the New York wineries are devastatingly affected. In this essay I will explain and show with the use of graphs, the effects that this tariff has on upstate New York vineyards . I will also explain which businesses and groups of people suffer from this tariff, and which groups stand to gain from it . And finally, I will explain and show graphically how a potential movement in the exchange rate could help mitigate this problem and offset the tariff . The effect of the Canadian tariff imposed on importing New York State wine has created an overall decrease in the sales in New York State because this tariff in addition to taxes “can nearly double the cost of a bottle of wine” (Heller, 1) . According to Susan Spence, Vice President of the New York Wine and Grape Foundation, who was told by Canadian Customs Agents, if a bottle of wine costs 10 U . S . Dollars, after it goes through the Canadian tariff, the 12% provincial tax, the 5% federal tax, and the 62-cent excise tax, it would cost a total of 17 . 20 U . S . Dollars . With only the 39 . 6% marked up tariff alone, that bottle of 10 U . S . dollars gets increased to 13 . 96 U . S . dollars without even any taxes . The graph on the last page labeled (1a), illustrates the effects the Canadian tariff has on New York wines . This graph is a supply and demand graph of the domestic market for wine in Canada . The X-axis labels the total quantity of wine, and the Y-axis labels the price per bottle of wine .
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