Protectionism Flashcards

1
Q

What is protectionism?

A

It is the process of restricting / limiting the entry foreign goods coming into the country. It is adopted in order to protect domestic producers from foreign competition.

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2
Q

What are methods of protectionism?

A

01) Tariffs - A tax incidence on imports
02) Quota- A physical restriction o the number of goods, no tax revenue to the government
03) Embargo - Complete restriction on a good from a country, perhaps illegal drugs, or due to war
04) Exchange rate control - The central bank of a country regulates the cash inflows and outflows of a country
05) Red tape/ Administrative burden - Imposing excessive administration burden (time-consuming long forms to fill)

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3
Q

What are the factors in favor of protectionism?

A
  • Protection of infant industries
    -Protection of sunset industries
  • Raising employment
  • Avoid unfair foreign competition / DUMPING
    -protection of industries from the exploitation of labor
  • to Correct BOP disequilibrium
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4
Q

What are the arguments against protectionism?

A
  • encourage inefficient producers
    -Customers may have to pay higher prices for domestic goods than if they were to import them
  • At the time of removal, economic problems may arise
  • The local industry may try to monopolize the market and provide poor-quality products, due to the lack of foreign competition.
  • New technology may not come to the market.
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5
Q

What is bilateral trade?

A

Trade between two countries

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6
Q

What is multilateral trade?

A

Trade between several countries

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7
Q

What is globalisation?

A

This is the integration of the world’s economies into one international market.

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8
Q

What are advanatges of globalisation ?

A
  • Resources of different countries are used for producing goods and services that they have a comparative advantage in/most efficient in.
  • Consumers can experience a wider variety of goods
  • companies get access to wider markets
  • promotes understanding, goodwill and networking
  • Businesses and investors. get wider opportunities for investment
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9
Q

What are the disadvantages of globalisation?

A

-developed countries can interrupt the development of developing countries
- economic depression in one country can trigger adverse reactions across the globe
- Can increase the spread of communicable diseases
- Companies may face greater competition

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10
Q

What does the tariff diagram look like?

A
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