Question

1. What will be the impact of the trade war with China in 2019 (i.e. imposed a 25% tariff on imports each other) on the U.S. real GDP in your opinion? Please state both the short-run and long-run impacts briefly. Providing a reference link (URL) to an article that supports your opinion is a plus.

2. An economy uses only labor as input to produce two goods, A and B. If its production possibilities frontier (PPF) of two goods is a negative-sloped straight line, what is the implication in opportunity costs? Will the law of increasing costs still hold? Please state briefly.

3. The U.S. has been a trade-deficit country for a long time. Do you agree with that “Americans enjoy a better life from buying more inexpensive products from foreign countries”? Please explain your answer briefly.

4. In your opinion, what imparted products or outsourcing services should be made or provided in the USA to enhance the employment or GDP U.S. economy? Please provide at least 3 goods or services as your choice by a brief explanation.   

Answer 1

Tariff escalation between China and US will impact the world trade in short run. China off late and in past has been accused of using unfair trade practices such as providing huge subsidy to it's export oriented sectors and anti dumping policies.

In short run the immediate effect of rise in tariff will be higher prices of imports from China which will mean fall in imports from China . This will increase employment and thus income level in US economy.

In long run there are more serious effects like change in trade pattern between China and US . In long run as more products are produced domestically thus more factories band industry will come up it would lead to higher employment , higher income and thus would increase growth rate of US economy.

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