The economy of Ashville is currently in a macroeconomic equilibrium, as depicted by point E, in the accompanying figure. The main component of Ashville's exports consist of the raw materials that it derives from its natural resources. Suppose that the world demand for raw materials decreases sharply, resulting in a decrease in the price of raw materials throughout the world. The decrease in the world demand for raw materials, which is the major source of Ashville's exports, will the level of aggregate demand in Ashville, causing a the AD curve. shift in The decrease in the world demand for raw materials, which implies a decrease in the level of factor prices, leads to in the unit cost of production in Ashville, causing a shift in the AS curve. Use the three-point curve drawing tool twice to draw and label new AS and AD curves that shows the effect of this shock on Ashville's economy. Carefully follow the instructions above, and only draw the required object. The overall effect of this shock on Ashville's equilibrium is ambiguous. Price Level (P) 2,000- 1,800- 1,600- 1,400- 1,200- 1,000- 800- 600- 400- 200- 0+ 0 1 Economy of Ashville 2,000 Eo 4,000 6,000 Real GDP (Y) ASO ADO 8,000 10,000

Suppose that the U.S. increases its tariffs on all imported goods. Obviously, this will have an impact on the amount of U.S. imports. What indirect effect will this have on U.S. exports – and why?

Complete the following paragraph to explain the effect of multinational enterprises on a host nation's economy. Assume a large pharmaceutical company based in Germany, where the corporate tax is 37% decides to relocate some production of pharmaceuticals to Ecuador, where the corporate tax is 8%. If the parent company from Germany purchases pharmaceuticals from its subsidiary in Ecuador at grossly inflated prices, the result is a neutral impact on Ecuador's economy, and a positive impact on Germany's economy. As a result, the regarding the German subsidiary locating in Ecuador. governments of Germany and Ecuador are likely to experience conflict Now, assume that a major national election takes place in Ecuador. As a result, the Indigo party has come to power. Assume that the Indigo party's main political stance is nationalization of all pharmaceutical facilities. Based on this knowledge of the Indigo party's politics, businesses in Germany are likely to support ▼ the election of the…

Improved methods of inventory control were supposed to reduce fluctuations in inventory stocks. It is clear that these methods have helped reduce the equilibrium inventory/sales ratios in both the manufacturing and trade sectors over the past decade. Yet we find that during the 2001 recession, inventory investment accounted for more than the total decline in real GDP, the first time that had happened since 1949. Explain whether this result is due to a set of odd coincidences, or whether the improved methods of inventory control actually caused bigger fluctuations in inventory investment relative to final sales.  

Consider the following information pertaining to a country's imports, consumption, and production of t-shirts following the removal of Multi Fiber Agreement (MFA) quotas: Under After МFA МFA World Price ($/shirt) Domestic Price (S/shirt) Domestic Consumption (millions of shirts) Domestic Production (millions of shirts) 2.00 2.00 2.50 2.00 100 125 75 50 a. Use the information in the table above to graph the effects of the quota removal on domestic consumption and production. Include a companion graph for the world market like that shown in class. b. The deadweight loss associated with the quota is: c. The quota rents that were earned under the quota are: d. The gain in consumer surplus associated with quota removal is: e. The loss in producer surplus from the removal of the quota is: f. Assuming that the foreign government assigned the quota licenses, the amount the home country gained from removal of the quota is: 4.

Question 2 D- i),ii) and iii)

Consider an oil-exporting economy in its long-run equilibrium. Which of the following explains the ultimate short-run effect of a decrease in international oil price on the GDP of this economy? The GDP will ultimately be at potential output. The GDP will ultimately decrease. The GDP will ultimately increase. The effect on GDP will be ambiguous.