Politicians Often Argue for Tariff Increases in Order to Reduce

question 75

Multiple Choice

Politicians often argue for tariff increases in order to reduce the size of a balance of trade deficit.If tariffs are increased,what is the long-run effect most likely to be?

• A)a decrease in Canadian imports and an increase in Canadian exports
• B)an increase in both Canadian imports and exports
• C)an increase in Canadian imports and a decrease in Canadian exports
• D)a decrease in both Canadian imports and exports

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Definitions:

Futures Contracts

Legally binding arrangements to engage in the buying or selling of a designated financial asset or commodity at a price established in advance, to be executed at a designated future time.

Price Risk

This refers to the possibility of an investor experiencing losses due to changes in the market price of a security.

Hedge

Hedging involves making an investment to reduce the risk of adverse price movements in an asset, typically by taking an offsetting position in a related security.

Put Option

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.