Module 9 Assignment
1. What are some of the reasons for trade barriers? Which type of trade barrier is most effective?
There are a few reasons to have trade barriers. If a person is a productive member of society, and they have a job in such occupations as the manufacturing industry, they need protection. From what? From foreign competitors. This seems strange and if it were on the local level, somewhat similar to a monopoly. However foreign competitors cannot monopolize the market. This would hurt the locals. So they increase the tariffs so that they can not out compete with the locals.
They also nurture infant industries. Sometimes a new form of company is in its developing stages and eventually they become a competitor. Companies eventually become efficient and the barriers can be lifted, but ...view middle of the document...
Are you willing to put up with trade barriers (which means you pay more for products) to try to re-grow our production capability in the US?
No. I will buy what I want and if it is not the price that I want, I can go without. This is what will happen with me, and many other people. If prices are not low enough, I will not be a consumer. Bring the prices at a more seemingly affordable level, then I might reconsider the option.
Most of the world has floating exchange rates, which means the rate is determined constantly based on the demand and supply for one currency vs. another. The countries of the European Union have chosen to share a common and therefore fixed currency among the members. China pegs their currency to the dollar so it floats against other currencies as the dollar does, but is fixed with respect to the dollar.
3. Why can’t the world agree on a common rule? Should we try to force China to let their currency float?
Whether the issue is fixed or floating, both systems work well individually. If one wants a flexible exchange rate system, then they system of supply and demand kick in. If demand is high for currency, then the price is high. In a fixed exchange rate system the system is pegged against the US dollar.
And who is to say which rule is the best. If one lives in the US, they would say their system is best. What if a person lived in china? Then their rule would be best.
4. Some economists think the world will someday have just three currencies, the Euro, the Dollar, and the Yen. Why not just one? Let’s call it the Metro. What problems would that solve and what problems would that create?
Why should the world set on one common rule. If people want to conform to just one specific currency, and this form of currency fails, then what? This would solve a short term issue of currency exchange since it would not exist. However if the currency fails, then this would be a whole new set of issues.