Question

To answer these questions you must Watch Youtube video: Milton Friedman - Imports, Exports & Exchange Rates (14:01 mins long) and then answer the following questions.

1. What do you believe, based on what you have learned in this week's chapters, the video above, and perhaps other sources, are the reasons President Trump is willing to impose tariffs on certain products. Why not impose tariffs on all products? What economic arguments would you use to defend or criticize the use of tariffs?

2. Most of the world has floating exchange rates, but the Euro Zone combined the currencies of 17 countries to in effect, create a fixed exchange rate between them. China has a fixed exchange rate with the US dollar, and under values their exchange rate by 17% - 19%, thus giving them an unfair advantage in international exchange. Should the world governments get together and set up a common rule for currency exchange? Discuss.

Answer 1

1.0. The reason behind to impose tariffs is to protect the domestic industries and to create revenue for the federal government.

1.1. The major reason is to protect the intellectual property rights of US from the treats coming from Chinese region. The tariff imposed on Chinese imported products has the potential to make the country richer as well as stronger.

1.3. By imposing tariffs, us government is trying to protect the local or domestic industries which has less comparative advantage than other sectors. Therefore, it can further reduce unemployment from the society by increasing job opportunities.

2.0. In spite of a various disadvantages, business organization should not set global foreign exchange rate. Basically, floating and fixed both have benefits and drawback from the present scenario perspective.

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