Which of the Following Helps Explain How the Protective Stimulus

question 55

Multiple Choice

Which of the following helps explain how the protective stimulus of a trade tariff can be diminished?

• A) Any increase in net exports drives both GDP and interest rates higher and thus causes domestic currency to appreciate and reduce the price increase associated with the tariff.
• B) Exporters from abroad try to stabilize the international prices of their goods, even in the face of a tariff.
• C) Smaller than expected increases in import prices undermine the anticipated reduction in total imports.
• D) All of the above are at least partial explanations.
• E) Only b and c apply, because an increase in net exports should make both GDP and the interest rate fall.

---

Definitions:

Credit Sale

A transaction where goods or services are provided to a customer with the agreement that payment will be made at a future date.

Return

The income generated from an investment, or the act of returning goods to the seller for a refund or exchange.

Terms

Conditions and agreements under which something is provided or is to be provided, detailing the rate, quantity, and period.

Perpetual Inventory System

An accounting system that continuously records the quantities and values of inventory on hand and sold, updating records in real-time.