Suppose That the Small Open Economy (SOE)cannot Produce Consumption Goods

question 62

Multiple Choice

Suppose that the small open economy (SOE) cannot produce consumption goods, but domestic producers can produce investment goods. If a tariff t is imposed by the SOE on imports of goods
From the rest of the world, and the rest of the world imposes a tariff t on exports from the SOE to
The rest of the world, then

• A)exports increase
• B)output increases.
• C)trade increases.
• D)firms will not produce anything.
• E)investment increases.

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Definitions:

Continental Army

The revolutionary war army authorized by the Continental Congress in 1775, led by General George Washington, to fight against British rule during the American Revolution.

Declaration of Independence

A seminal document adopted on July 4, 1776, by the thirteen American colonies declaring their independence from British rule.

Treaty of Paris

The 1783 agreement that ended the Revolutionary War, recognizing American independence and granting significant land territories to the United States from Great Britain.