Other Things Equal, Which One of the Following Will Cause

question 1

Multiple Choice

Other things equal, which one of the following will cause an increase in the effective rate of protection (ERP) in the automobile industry?

• A) a decrease in the nominal tariff rate on automobiles
• B) an increase in the nominal tariff rates on imported inputs used in making automobiles
• C) an increase in the world price of imported inputs used in making automobiles
• D) a decrease in the nominal tariff rates on imported inputs used in making automobiles

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Definitions:

Business-Specific Risk

Also known as unsystematic risk, it refers to the risk associated with a specific sector or company.

Diversified Portfolio

An investment strategy that involves spreading investments across various asset classes to reduce risk.

Beta Coefficient

An indicator of the level of fluctuations or systematic risk associated with a particular security or portfolio relative to the overall market.

Volatility

The degree of variation of a trading price series over time, usually measured by the standard deviation of returns.