Macro A2 - Restrictions On Free Trade

Question 1

Tariffs

Answer 1

A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods

Question 2

quotas

Answer 2

a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period.

Question 3

Subsidies

Answer 3

Payments by the government to suppliers that reduce their costs. The effect of a subsidy is to increase supply and therefore reduce the market equilibrium price.

Question 4

Non tariff barriers

Answer 4

any measure, other than a customs tariff, that acts as a barrier to international trade.

Question 5

Explain the Impact of protectionist policies on consumers

Answer 5

Consumers’ limited choice and pay more for goods and services. A key effect of trade protectionism is that consumers will have a limited choice of products and goods since there may be quotas on how much may be imported.

Question 6

Explain Impact of protectionist policies on producers

Answer 6

The main effect of protectionism is a decline in trade, higher prices for some goods, and a form of subsidy for protected industries. Some jobs in these industries may be saved, but jobs in other industries are likely to be lost.

Question 7

Explain Impact of protectionist policies on governments

Answer 7

Less tax revenue
Higher unemployment
Improvement on BOP?

Question 8

Explain Impact of protectionist policies on living standards

Answer 8

Consumers – They are likely to face higher prices and less choice as a result of protectionism. Not only will the imported goods rise in price, so too will the prices of domestic equivalents. Protectionist measures also raise prices further down the supply chain.

Question 9

Explain Impact of protectionist policies on equality

Answer 9

Protectionist tariffs risk causing a loss of competition for domestic firms which eventually leads to lower productivity, less innovation and weaker competitiveness. Tariffs increase prices for consumers leading to higher inflation, reduced real incomes and an increased risk of poverty for poorer households.