Problem
1. A country imposes a tariff on imports from abroad. How does its action change the long-run real exchange rate between home and foreign currency? How is the longrun nominal exchange rate affected?
2. Imagine that two identical countries have restricted imports to identical levels, but one has done so using tariffs while the other has done so using quotas. After these policies are in place, both countries experience identical, balanced expansions of domestic spending. Where should the demand expansion cause a greater real currency appreciation, in the tariff-using country or in the quota-using country?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.