Answer to Question #152271 in Macroeconomics for marita ghostine

Question

Suppose the government of a small country suddenly decides to impose ten percent
permanent tax on imports. What happens to consumption, real wage rate, real interest rate, investment,
price level and real exchange rate in long run and very-long run? How would your answer change if this
import tax is temporary (lasting for one period) rather than permanent?

Answer 1

In the event that the public authority of a little nation forces charges on the import whether in increment income on import tax or to expand the limitations on import.

- There are different effects on a little economy in changes to import duties in since quite a while ago run extremely since quite a while ago run and in the event of transitory guidelines.

- The cost of the items is completely expanded to the estimation of the import charge rate over the long haul.

- If there should be an occurrence of the transitory case the cost of the items doesn't influence the cost of the world market.

- The excess paces of the assessments are decreased on both homegrown substitute and imported products.

- The utilization rate will be diminished in the economy because of the expansion in the import duty if it's for some time run and if there should be an occurrence of extremely since quite a while ago run the utilization rate increments gradually.

- On the off chance that it is brief, the buyer rate will be a higher abatement in the utilization rate.

Real wage rates:

- In the since quite a while ago run the expansion on import charge brings about the increment in the joblessness and there will be an extraordinary impact on the GDP and in the exceptionally since a long time ago run it is probably going to diminish and there will be more open positions to jump joblessness.

- In the event of transitory, there will be an ascent in the joblessness as the pay rates increment however the joblessness situation is of just brief nature.

Real loan fees:

- In the event that the nation is little and the cash conversion standard is low, at that point the ascent on import charge doesn't a lot of effects on the financing costs in if there should arise an occurrence of the short run.

- On the off chance that considering in the event of since quite a while ago run the loan fees will increment to increase in the estimation of import charge rates.

Real swapping scale:-

- Over the long haul on the off chance that the nation is sma and the cash esteem is lower, at that point the trade rates Lessly affect import strategy both in since quite a while ago run and short-run

- In any case, in the event of the nation with great money esteem there will be an expansion in the conversion standard.