Tariffs, quotas, exchange rates and the balance of trade
Grade 12 Social Studies Worksheet - Challenge Me
Circle the best answer.
Read this first
Use the table
U.S. trade and the dollar, each December (BEA, Census Bureau and Federal Reserve Board, read Nov 14, 2026)
Month Exports Imports Balance Broad dollar index December 2021 $236.4 billion $314.3 billion -$77.9 billion 115.8 December 2022 $253.6 billion $321.9 billion -$68.4 billion 122.2 December 2023 $262.7 billion $324.0 billion -$61.3 billion 119.8 December 2024 $270.6 billion $367.5 billion -$96.8 billion 127.6 Dollar amounts are for one month, seasonally adjusted. The index is the Federal Reserve Board's nominal broad dollar index (January 2006 = 100), December average. A stronger dollar tends to raise imports and lower exports, but with a lag, and trade also depends on incomes at home and abroad.
Ari reads the table for a report on the dollar and the deficit. Which claim does it support best?
- A stronger dollar widens the deficit each time, as the 2021 to 2024 Decembers show without exception
- The deficit shrank in each December after 2021, since exports rose in each of those Decembers
- They did not move together: the dollar rose into 2022 as the deficit narrowed, and into 2024 as it widened
- A weaker dollar in 2023 produced the largest deficit of the four Decembers shown
From December 2021 to December 2022 the dollar index rose and the deficit narrowed. Bo looks for the best explanation. Which is it?
- Exports fell and imports rose, so the deficit narrowed because both moved in the same direction
- Exports grew faster than imports, 7.3 against 2.4 percent, so other forces beat the dollar's rise
- The stronger dollar raised exports by making U.S. goods cheaper to foreign buyers
- The stronger dollar cut imports, which narrowed the deficit by lowering the amount bought abroad
Esme reads December 2023 to December 2024: the index rose about 6.5 percent, imports about 13.4 and exports about 3.0. Which claim is best?
- Exports rose 3.0 percent because a stronger dollar makes U.S. goods cheaper abroad
- The pattern fits a stronger dollar, but the table cannot show the dollar caused the jump
- The stronger dollar caused the jump, since imports rose by about twice the dollar's 6.5 percent
- A stronger dollar should have cut imports, so these figures contradict the theory of the card
Jun wants evidence that would better separate the dollar's effect from other causes. Which is the most useful?
- Whether the index uses 2006 or another base year, since a new base year would reverse its rises and falls
- How many countries are in the broad index, since the number decides whether the dollar rose
- The exports of each state, since states trade different goods with different countries
- Quantities traded and income growth at home and abroad, since dollar totals blend prices and volumes
A tariff on imported steel (made up) (example figures, made up for practice)
Effect Amount Steel mill jobs protected 2,000 Jobs lost in industries that buy steel 3,500 Extra cost to steel buyers each year $450 million Tariff revenue each year $120 million Farm exports lost to other countries' tariffs in response $300 million Other countries answered with tariffs on U.S. farm goods. Costs and gains are yearly.
Kira sums the jobs and the cost per job saved. Which statement does the table support?
- Net jobs fall by 3,500, the number lost in the industries that buy steel
- Jobs are unchanged, since the $120 million of revenue pays for the lost jobs
- Net jobs rise by 2,000, the number of mill jobs protected by the tariff each year it stands
- Net jobs fall by 1,500, and steel buyers pay about $225,000 for each mill job saved
Supporters say jobs matter more than costs, so the tariff is right. Luz tests that on jobs alone. What is the verdict?
- It wins on jobs, since the 2,000 protected jobs are easy to see and the lost jobs are spread out
- It cannot be judged on jobs, since the table lists no wage for either group of workers
- Even on jobs alone the table is against it: 2,000 jobs gained and 3,500 jobs lost
- It passes on jobs, since the revenue could fund retraining for the 3,500 workers who lose jobs
Milo adds the $300 million of farm exports lost to other countries' tariffs. What does it do to the case?
- It changes the jobs result alone, since farm exports are measured in jobs and not dollars
- It strengthens the case against: the farm loss is another cost on a different group
- It weakens the case against: lower exports reduce the trade deficit, which is good
- It makes no difference, since retaliation affects farmers and not the steel market
Use this
The dollar and the yen, 2020 and 2024 (example figures, made up for practice). Columns: Year, Yen per dollar, U.S. basket price, Japan basket price. 2020, 100, $100, 10,000 yen; 2024, 150, $120, 11,000 yen. The nominal rate is the yen per dollar. The real rate compares the two countries' baskets in the same money: the U.S. basket in yen divided by the Japan basket in yen. 2020 is the base year, when the real rate is 1.
The nominal rate rose 50 percent. Ren describes the dollar in real terms against the yen. Which description is best?
- About 64 percent in real terms, more than the 50 percent nominal rise, since U.S. prices rose faster
- About 64 percent, but a different base year would change that 64 percent to another figure
- About 50 percent in real terms, since real and nominal rates differ just by the base year
- About 25 percent in real terms, the 50 percent nominal rise less the 20 percent rise in U.S. prices
Tala prices the Japan basket in dollars. How much cheaper is it for Americans in 2024 than in 2020?
- No change, since inflation in both countries offsets the exchange-rate move completely
- About 33 percent cheaper, near $67, since the yen's value in dollars fell from 1/100 to 1/150
- About 27 percent cheaper: $73 against $100, since 11,000 yen at 150 yen per dollar is about $73
- About 10 percent dearer, near $110, since Japan's prices rose 10 percent in yen over four years
A writer says the 50 percent rise in yen per dollar means U.S. goods cost Japanese buyers 50 percent more relative to Japanese goods. Zee tests it. What is the verdict?
- Wrong: relative prices did not change, since both countries had inflation
- Close but not exact: the relative price rose about 64 percent, since U.S. prices rose faster
- Exact: the nominal exchange rate is the relative price of the two countries' goods
- Wrong: relative prices fell, since a stronger dollar makes U.S. goods cheaper to Japanese buyers