1. explain the infant industry argument. 2. explain the role of economic freedom

Question

1. explain the infant industry argument.

2. explain the role of economic freedom in economic development.

3. What does it mean when the dollar appreciates? what does it mean when the dollar depreciates?

27. under a flexible exchange tae system, one factor that does not directly affect rates of exchange is:

a. changes in the inflation rate in eacher country

b.changes in economic stability in each country

c.changes in productivity in each country

d.changes in gold holdings in each country

26. the demand for foreign currency in the US is:

a.direct demand

b.derived demand based on the demand for foreign product

c.derived demnd based on the demand for US product

d.direct demand based on the demand for the US dollar

Explanation / Answer

1.The infant industry argument is an economic rationale for trade protectionism. The core of theargument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale.

2. The role of economic freedom is to provide personal choice, voluntary exchange, freedom to compete in markets, and protection of person and property. Institutions and policies are consistent with economic freedom when they allow voluntary exchange and protect individuals and their property and thus promote Economic development.

3. The appreciation of a Dollar refers to an increase in the value of Dollar relative to the foreign currency. For example , if the dollar appreciates relative to the euro, the exchange rate falls: it takes fewer dollars to purchase 1 euro

The depreciation of a Dollar refers to an decrease in the value of Dollar relative to the foreign currency. For example , if the dollar depreciates relative to the euro, the exchange rate rises: it takes more dollars to purchase 1 euro

27. d.changes in gold holdings in each country

26. b.derived demand based on the demand for foreign product

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