The Figure Below Shows the Demand (D) and Supply (S)

question 24

Multiple Choice

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1 In the figure,
P₁: Price of the good in the international market.
P₂: Price of the good in the domestic market after the imposition of tariff by the government.
P₃: No-trade price of the good in the domestic market.
-Refer to Figure 21.1.If the government imposes a tariff such that the price of the good in the domestic market is P₂ while the international price is P_1,the dollar value of the tariff is equal to:

• A)P₃ - P₁.
• B)P_{2 -} P₃.
• C)P₂ - P₁.
• D)P₁ - P₂.
• E)P₁ - P₃.

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Definitions:

Hyperinflation

An extremely high and typically accelerating inflation rate, causing a rapid erosion of currency's value.

Deflation

A decrease in the general price level of goods and services, often characterized by the increase in the value of money.

Disinflation

Disinflation is the process of slowing down the rate of inflation, indicating a reduction in the speed at which the general level of prices for goods and services is rising.

Wage-Price Spiral

A macroeconomic concept describing a situation where rising wages lead to increased prices, which in turn lead to demands for higher wages, thus perpetuating inflation.