If Canada Reduces the Tariff Imposed on a Commodity from 10

question 38

Multiple Choice

If Canada reduces the tariff imposed on a commodity from 10% to 5%,we would expect to observe

• A)a reduction in the quantity consumed of the commodity in Canada.
• B)a reduction in the quantity produced of the commodity in Canada.
• C)an upward shift in the commodity's demand curve.
• D)a downward shift in the commodity's demand curve.
• E)an increase in quantity produced of the commodity in Canada.

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Definitions:

Nominal Exchange Rate

The speed at which one form of currency can be traded for another.

Currency

A system of money in general use in a particular country or economic context.

Real Exchange Rate

The value of a currency in terms of another currency, adjusted for differences in price levels between countries.

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners, which reflects the flow of capital out of a country.