Lesson 36 - Protectionism

Question 1

Give three examples of protectionist policies that governments might choose to implement in order to safeguard domestic goods?

Answer 1

Tariffs
Quotas
Export Subsidies

Question 2

Define the term tariff?

Answer 2

A tariff is a tax placed on an import to increase its price and decrease the demand for it.

Question 3

Why do governments chose to impose tariffs?

Answer 3

They are imposed by governments to raise revenue and restrict imports.
Imported goods will be more expensive thus meaning consumers are likely to switch to domestic goods.

Question 4

Define the term quota?

Answer 4

A quota is a physical limit on the quantity of a good imported or exported. It is an example of a physical control.

Question 5

What are subsidies?

Answer 5

Subsidies are a way of a government protecting their domestic market. Money is given to local producers to make their goods cheaper on the domestic market.

Question 6

What is the purpose of subsidies?

Answer 6

The price of the domestic product is artificially reduced thus making it more competitive against imported goods.

Question 7

Give three examples of government action regarding imported goods?

Answer 7

Legislation regarding product quality requirements to restrict certain products that do not meet the standard.
Preferential state procurement policies - this is where a government favours local or domestic producers.
Exchange controls - this involves limiting the foreign exchange that can move between countries.