Jaisul Naik

A tariff is a tax on imports. It is a form of protectionism. Protectionism is a barrier against free trade. The diagram below shows the effect of a tariff on a market. The

* The Marshall Lerner condition states that * if the currency depreciates * balance of payments will improve * if * ped for imports and exports is elastic * BUT * if ped for imports and exports is inelastic (<

* Normally, when your currency depreciates * exports increase and imports fall so balance of payments improves * However, * The J-curve shows that, when your currency depreciates * the balance of payments worsens. * This is because exports

* Summary * AD left shift * Evaluation * sign of high incomes - luxury goods being imported * pound will fall and current account deficit will automatically correct A current account deficit occurs when the total value