Let\'s say that our country imposes tariffs and quotas or other trade restrictio

Question

Let's say that our country imposes tariffs and quotas or other trade restrictions on imported goods and services from other countries. According to our text, this usually leads to:

A. a decrease in the rate of our domestic unemployment.

B. retaliation from other countries (they put trade restrictions on our products). Consequently, our exports decrease, and there usually is no overall benefit to our country's production and employment.

C.a decrease in the rate of our inflation. This leads to lower interest rates in our country and a stimulus to our economy.

D. a decrease in our imports and an increase in our exports. This leads to a trade surplus or a smaller trade deficit and a higher GDP.

Explanation / Answer

D. a decrease in our imports and an increase in our exports. This leads to a trade surplus or a smaller trade deficit and a higher GDP.

Restriction on imports causes fall in imports compared to exports. So, there should be trade surplus or smaller trade deficit. It resulted into higher GDP.

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