Many Economists Criticize Protectionism Because It Causes Losses to Consumers

question 101

Multiple Choice

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products.Why, then, do some people support protectionism?

• A)The criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment.
• B)Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries.
• C)Supporters of protectionism believe free trade will cause their countries to lose their comparative advantage.
• D)Supporters of protectionism believe that free trade will lead to inflation.

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Definitions:

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to assess price changes associated with the cost of living.

GDP Deflator

A price index used to measure price changes in the items that go into GDP.

Cyclical Unemployment

Unemployment caused by fluctuations in the economic cycle, such as expansions and recessions, often related to changes in demand.

Real Rate

The real rate is the interest rate adjusted for inflation, reflecting the true cost of borrowing or the real yield on an investment.