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.

Question

Quizplus · Accepted Answer

Import-substituting policies, by definition, aim to promote domestic production of goods that would otherwise be imported. This often involves the use of protective tariffs, which make imported goods more expensive and less competitive in domestic markets. As a result, domestic producers may become complacent and less focused on exporting goods, leading to a decline in competitiveness in international markets.

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