Please answer the questions below in no more than 500 words based on the following posed trade policy scenario: The US increases trade restrictions with China.
- How does this affect Aggregate Demand and Supply?
- What are the corresponding effects on Unemployment and Inflation as a result?
- What fiscal and or monetary policies would you recommend to bring the economy back to Long Run Equilibrium?
- Why would or why wouldn’t you support this trade policy?
In answering these questions, the student should be able to:
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- Correctly interpret the impact of the discussed trade policy scenario on aggregate supply & demand.
- Use appropriate economic reasoning in the critique of trade policy scenario.
- Correctly identify the given trade policy scenario’s impact on unemployment and inflation.
- Recommend the appropriate fiscal and or monetary policies, given the trade policy scenario examined.