2 Lessons about trade policy Import restrictions cannot reduce a trade deficit. ■ Even though NX is unchanged,there is less trade: the trade restriction reduces imports the exchange rate appreciation reduces exports Less trade means fewer gains from trade.' Return CHAPTER 12 Aggregate Demand in the Open Economy slide 15 slide 15 § Import restrictions cannot reduce a trade deficit. § Even though NX is unchanged, there is less trade: – the trade restriction reduces imports – the exchange rate appreciation reduces exports Less trade means fewer ‘gains from trade.’ 2 Return