Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers. This statement:
a. is essentially correct.
b. contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers.
c. contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers.
d. contains one error; the trade restraints do not increase the scarcity of foreign produced goods.
Question 2
Which of the following can be considered as a cultural barrier to trade?
a. Prohibition on Zimbabwean aircrafts from flying over or landing in Canada.
b. Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada.
c. An arms embargo imposed on China by the U.K. government
d. Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business.
e. Restriction on the export of strategic goods to Ghana imposed by the government of U.K.
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Flexible exchange rates are supposed to prevent long-term trade deficits.