Net effect on the balance on goods and services
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Suppose a nation's savings, gross private domestic investment, government spending, and taxes remained unchanged from period 1 to period 2, but tariffs and quotas on imported goods and services rose by 20% from period 1 to period 2. The net effect on the balance on goods and services would be:
A. It would make the balance on goods and services more positive
B. It would make the balance on goods and services more negative
C. It would have no effect on the balance on goods and services
D. There is no way to tell what effect it would have on the balance on goods and services
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Solution Summary
This solution shows how to calculate the net effect on a country's balance on goods and services from period 1 to period 2, given that their savings, gross private domestic investment, government spending, and taxes remained unchanged and their tariffs and quotas on imported goods and services increased.
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There are two ways to calculate GDP using the expenditure method. One is Y = C + T + S, where Y is GDP, C is consumption, T is taxes and S is private savings. The other is Y = C + I + G + X - M where Y is GDP, C is consumption, ...
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