A tariff on a good when the world price is lower than the domestic price leads t

Question

A tariff on a good when the world price is lower than the domestic price leads to Select one domestic imports that will be higher than under free trade lower domestic consumption of the good than under free trade tariff revenues that will be lower than under free trade lower domestic production of the good than under free trade Which of the following is an example of an active labor market policy? Select one: Unemployment insurance (unemployment benefits) Minimum wage Employment protection laws Job search assistance The principle that an initial change in spending win lead to an even larger change in total output is called Select one The business cycle effect The recession effect The wealth effect The multiplier effect

Explanation / Answer

Q6. If world price is lower than domestic price then in that case if country indulges in free trade then it will trade at world price.

Since, World price is lower thandomestic price, price will fall in the said country when country comes under free trade.

This will lead to increase in consumption.

However, if tariff is imposed than new price (world price plus tariff) would be greater than world price.

As peice will increase, demand or consumption will decrease.

So, quantity demanded or consumption at new price (world price plus tariff) will be lower than that under free trade.

Hence, the correct answer is option (b).

Q8. It is the multiplier effect that states that an initial change in spending will lead to an even larger change in total output.

Hence, the correct answer is option (d).

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