The mercantilist economic doctrine was widely followed from the sixteenth to the eighteenth century in Europe
Mercantilists advocated the use of tariffs to restrict trade as they believed that countries that export more than they import will increase wealth. What could be the problem with such an economic policy?
While the Mercantilists believed that higher exports would increase wealth, they overlooked some of the adverse effects of tariffs. With tariffs, consumers pay a price that is higher than the world price of a commodity. Tariffs raise prices for consumers and reduce total surplus in a country. Although government earns revenues from tariffs, it also leads to deadweight losses in the market.
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If the U.S. interest rate is 5% and the interest rate in Germany is 2%, and the euro is expected to appreciate by 2% over the next year, then investors would:
a. sell dollars in the spot market. b. buy euros. c. seek to invest in the United States. d. seek to invest in Germany.
Empirical evidence indicates that money demand is determined by
A) interest rates and the level of GDP. B) the inflation rate and the unemployment rate. C) interest rates and the money supply. D) the money supply and the level of GDP.