ECO365H1 Study Guide - Hadad, Money Supply, Royal Aircraft Factory F.E.2
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Ecmc61 chapter 17 review questions answer key. If the imposition of tariff is temporary: tariff ad dd shifts to the right to dd(ad1). Since the tariff is temporary, there is no change in expectation, i. e. , ee remains unchanged: point b is the short-run equilibrium: Overall, ca (the initial in ca due to the import tariff is only partially offset by the in. If the imposition of tariff is permanent: tariff ad dd shifts to the right to dd(ad1). Since the tax relief is permanent, agents expects dc to appreciates, i. e. , ee decreases from, Ee,0 to ee,1: an expected appreciation of dc shifts aa schedule shifts downward to aa(ee,1), point c is the short-run equilibrium: Overall ca does not change (the initial in ca due to the import tariff is fully offset by the in ca due to real appreciation of dc)
