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Lecture 42

ECO102H1 Lecture Notes - Lecture 42: Canadian Dollar, Mexican Peso, Exchange Rate


Department
Economics
Course Code
ECO102H1
Professor
Jack Carr
Lecture
42

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Tuesday, April 6th, 2010
Canada does not have comparative advantage in production of textiles
Before trade (BT)
PBT > PW
QBT = domestic quantity demanded/supplied
After trade (AT)
PAT = PW
QSAT = Domestic quantity supplied
QDAT = Domestic quantity demanded
QDAT - QSAT = Imports
Terms of Trade
Index of export prices
Index of import prices
Insight: If terms of trade increase, country is better off
Tariffs
Definition: tax imposed on imported goods
Why do countries impose tariffs?
To protect import-FRPSHWLQJLQGXVWULHV³VSHFLDOLQWHUHVWV´
Example: (1) Country imports good (and also produces good domestically)
(2) Country is small and takes the world price as given
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