Protectionist policies (Macro) Flashcards
(54 cards)
What are protectionist policies?
Implementing policies that will protect an economy through restrictions on imports.
Protectionist policies aim to reduce imports to support domestic industries.
What is a tariff?
A tax on imported goods and services.
Tariffs increase the price of imports relative to domestic products.
How do tariffs affect consumer behavior?
Tariffs lead to a contraction of demand and encourage a switch to domestic substitutes.
Consumers are incentivized to buy domestically produced goods when import prices increase.
What is the effect of a tariff on the world supply curve?
A tariff shifts the world supply curve upwards.
This results in an increase in the price of imported goods.
What is a quota?
A restriction on the number of a particular kind of import into an economy.
Quotas limit the physical quantity of imports allowed.
What are export subsidies?
Government-provided subsidies for firms which produce exports.
These subsidies aim to encourage domestic production for foreign markets.
Fill in the blank: A _______ is a limit on the physical number of imports allowed into a country.
[quota]
True or False: Tariffs only benefit consumers by lowering prices.
False.
Tariffs increase prices of imports, which may lead consumers to buy less and switch to domestic products.
What are protectionist policies?
Policies aimed at protecting domestic industries from foreign competition
What is one justification for protectionist policies?
To protect jobs that would otherwise be lost to lower-cost producers overseas
What is the potential downside of protectionist policies for consumers?
Consumers may have to pay higher prices for their goods
What does comparative advantage theory suggest about jobs?
Jobs can be gained elsewhere if a country specializes
What is the infant industry argument?
Justification for protecting small, newly established businesses until they can compete
What is a potential negative effect of protecting infant industries?
It may remove the incentive for these industries to become efficient
What is anti-dumping?
A protectionist measure to prevent harm to domestic businesses from overseas low-cost producers
How is dumping viewed in the context of international trade?
As ‘unfair’ competition but difficult to prove
What are sunset industries?
Industries in long-term decline that may benefit from gradual protection
What is the strategic reason for government protection of industries?
To keep strategically important industries running despite cheaper imports
What is a customs union?
A form of economic integration between countries with a common external tariff
What is the main economic benefit of a customs union?
Gains from free trade, allowing wider consumer choice at lower prices
What defines a free trade area?
Trade without barriers, such as tariffs, between two or more countries
Fill in the blank: An infant industry is a small, developing industry which cannot yet benefit from _______.
economies of scale
Fill in the blank: Dumping occurs when a low-cost producer sells large quantities of a product below _______ in another country’s market.
cost price
True or False: Any attempt to use protectionist policies is likely to lead to rapid retaliation by affected countries.
True
