ECON-2006EG Study Guide - Quiz Guide: Autarky, Milton Friedman, Deadweight Loss

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At the end of the lecture the student . Can explain the effects of autarky, open trade and tariffs on all market parties. Can explain the effect of savings and investments on trade surpluses and deficits. Export: selling goods / services to abroad. Trade surplus export more than import. Trade deficit import more than export. Trade balance export & import same. Investment > savings = deficit: (a) invests 2 apples in (b, (b) trades 3 apples to (a, (a) saves 1 apple. Investment < saving = surplus: (a) invests 3 apples in (b, (b) trades 1 apple to (a, (a) saves 4 apples. Japan: put money into us; have to exchange yen; demand $ dollar price increases (demand); yen price decreases (supply) Result: u. s. can import much to japan due to strong currency but cannot buy a lot back (export) because the currency is too expensive for japan. Trade deficit for u. s. ; trade surplus for japan.

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