One of the Main Reasons Why Many Economists Remain Critical

question 77

Multiple Choice

One of the main reasons why many economists remain critical of the infant industry argument is its reliance on the assumption that

• A) protection of manufacturing from foreign competition is harmful.
• B) absolute advantage cannot sustain productivity of an industry.
• C) foreign firms too come under the definition of infant industry when they newly enter a foreign market.
• D) firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital markets.
• E) foreign competition will eventually cause domestic firms to improve the quality of their products.

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Definitions:

Primary Reserves

Liquid assets held by financial institutions to meet regulatory requirements and immediate liquidity needs.

Secondary Reserves

Assets that are easily convertible into cash but are not held in the form of cash itself, serving as a backup for primary reserves in financial institutions.

Borrow From The Fed

The act of financial institutions taking loans from the Federal Reserve, usually to maintain reserve requirements or to stabilize liquidity.

Fiscal Policy

Government policies regarding taxation and spending designed to influence economic conditions, such as growth rates, inflation, and employment.