How Do High Tariffs and Other Restraints on International Trade

question 103

Multiple Choice

How do high tariffs and other restraints on international trade affect a nation's prosperity?

• A) They increase employment and thereby promote the growth of real GDP.
• B) They prevent the nation from fully realizing the potential gains from specialization, exchange, and competition.
• C) They protect domestic producers and thereby promote economic growth.
• D) Both a and c are correct.

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Definitions:

Aggregate Demand Curve

The aggregate demand curve represents the total quantity of all goods and services demanded by the economy at different price levels.

Aggregate Supply Curve

A graphical representation showing the relationship between the total production of goods and services in an economy and the overall price level.

Price Index

An average that measures the change in prices paid by consumers for goods and services over time, indicating inflation or deflation.

GDP

Gross Domestic Product, a measure of the economic performance of a country, indicating the total value of all goods and services produced over a specific time period.