The microeconomic reasoning of the production possibilities curve suggests that an increase in trade protection tends to ________ output,but the short-run macroeconomic reasoning of the Keynesian cross diagram suggests that an increase in trade protection may ________ output.

Question

Quizplus · Accepted Answer

The microeconomic reasoning of the production possibilities curve suggests that an increase in trade protection tends to decrease output since it restricts competition and reduces efficiency. However, the short-run macroeconomic reasoning of the Keynesian cross diagram suggests that an increase in trade protection may increase output as it stimulates demand for domestic goods and services. Therefore, the answer is C.

The Microeconomic Reasoning of the Production Possibilities Curve Suggests That