write a short paragraph or flow chart: The effect of a VAT in the United States: value added tax; assume a lower income tax accompanies the VAT. Also, assume elimination of most personal (household) tax deductions such as mortgage interest.
Show the cause and effect —-as it plays out on the components of NE, BOP and currency exchange.
Then, relate the effects on the U.S.A.’s international trading partners. How will they react: contribute, retaliate???
Defend the chain of events: use footnotes to explain your reasoning (where necessary).
State assumptions.
There is no single “correct” answer but there are wrong answers.
Think this through carefully.
Do not make this a political discussion: consider this in an International Economic framework.
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