A senator renounces her past support for protectionism: The U.S. trade deficit must be reduced, but import
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A senator renounces her past support for protectionism: “The U.S. trade deficit must be reduced, but import quotas only annoy our trading partners. If we subsidize U.S. exports instead, we can reduce the deficit by increasing our competitiveness.” Using a three-panel diagram, show the effect of an export subsidy on net exports and the real exchange rate. Do you agree with the senator?
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An export subsidy increases net exports at any give...View the full answer
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