In a Small Open Economy with a Floating Exchange Rate

question 57

Multiple Choice

In a small open economy with a floating exchange rate, if the government imposes a tariff on foreign goods, then in the new short-run equilibrium:

• A) imports will decrease while exports remain constant, leading to a rise in net exports.
• B) imports will decrease and exports will increase, leading to a rise in net exports.
• C) imports will decrease and exports will decrease by an equal amount.
• D) both imports and exports will remain unchanged.

---

Definitions:

Queuing Theory

A mathematical study of waiting lines or queues, focused on understanding and optimizing processes in which entities wait for service.

Waiting Time

The period during which one waits for something to happen or arrive.

Hierarchy of Authority

An organizational structure where every entity in the organization, except one, is subordinate to a single other entity.

Efficiently

means accomplishing a task or completing a process in a way that maximizes productivity with the minimum wasted effort or expense.