General Equilibrium Considerations Lead to the Realization That Import-Substituting Policies

question 42

Multiple Choice

General equilibrium considerations lead to the realization that import-substituting policies have an effect of

• A) discouraging exports.
• B) encouraging exports.
• C) encouraging an efficient use of a country's resources.
• D) generating large tariff revenues for the government.
• E) creating competitive manufacturing sectors.

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Definitions:

Future Cash Flows

Estimates of the amount of money expected to be received or paid out in the future through investment, business operations, or other financial activities.

Investment

The act of allocating resources, typically money, with the expectation of generating an income or profit.

Opportunity Cost of Capital

The return foregone by investing in a project instead of in comparable financial assets with similar risk.

Net Present Value

Net Present Value (NPV) is a financial metric that calculates the present value of all future cash flows (positive and negative) expected from an investment, adjusted for time and interest.