Examlex

Solved

An Export Subsidy Has the Opposite Effect on Terms of Trade

question 1

Essay

An export subsidy has the opposite effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the domestic terms of trade. A production subsidy for the export product will lower the local price of the export good, lowering the domestic terms of trade for the country. Hence the export subsidy and the import tariff have the same effect. This analysis seems to contradict the first sentence in this paragraph. Discuss this paradox.


Definitions:

Recurrence

Recurrence refers to the repetition of certain actions or events at regular intervals or under specific conditions.

Regular Intervals

Occurrences or events happening at consistent, predictable times or distances apart.

Appointment

A scheduled meeting or arrangement, especially in professional contexts, often set for a specific time and place.

Print Style

A configuration setting used to specify the appearance of a printed document.

Related Questions