30 : Protectionism

Question 1

What are the different forms of protectionism

Answer 1

• Tariffs: import taxes

• Quotas: physical volume limit on imports allowed into the country

• Subsidies: a government payment to encourage Domestic production by lowering their costs

Question 2

What are some arguments for protectionism

Answer 2

• To raise government revenue : tariff revenue can be spent on merit goods such as education and health

• To improve current account deficit: lower spending on imports which can also raise economic growth

Question 3

What are the advantages and disadvantages of protectionism

Answer 3

AD :
• Government receives tax revenues from foreign firms
• Reduces imports
• Raises GDP through increase national income

Dis:
• Higher price for consumer so less consumer surplus people with low incomes can’t afford
• Other form of protectionism can be better