MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 21, Problem 3DQ
To determine
To discuss: The weapons United States can use in a trade war against country X and the effect of those weapons on the US as well. The consequences if country X retaliates has to be explained as well.
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Your rich great uncle left you some money to buy a new car. If you plan to purchase a foreign car, how might trade barriers impact the price that you have to pay for that car?
Congratulations! Your rich great uncle left you some money to buy a new car. If you plan to purchase a foreign car, how might trade barriers impact the price that you have to pay for that car?
As you may have heard, Russia decided to invade its neighbor, which has led to international condemnation (albeit not on all fronts). The EU, a former major importer of gas from Russai, went ahead with sanctions. Imagine, if you will, that the respective heads of state get together and try to negotiate a trade agreement to end sanctions. They each have three possible choices: (a) Maintain tariffs against the other nation (T); (b) Seek mediation from the WTO, which would implement an international trade agreement at a small cost (M); (c) Unilaterally remove tariffs (F). The payoff matrix is as given below. Is there a dominant strategy for either player? Find all the (pure strategy) Nash equilibria in the game. How would this change if, instead, the mediation is costless and yields a payoff of 50 to each nation (assuming mutually successful mediation) and a payoff of 0 (if the other nation chooses otherwise)? **
Chapter 21 Solutions
MACROECONOMICS
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- If you were to purchase a foreign car, how might trade barriers impact the price of that you have to pay for that car?arrow_forwardWhat can be worth more or less in international markets depending on how trustworthy the government is that created it, and the available supply and level of demand? Gold standard Commodity Cryptocurrency Fiat currencyarrow_forwardWould the car company toyota prefer liberization or protectionism? Why would they choose one over the other?arrow_forward
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