Suppose that Canada places higher tariffs on imports of ice cream. What would be the most likely result?
A) The tariffs would reduce imports into Canada, which would cause Canadian net exports to rise.
B) The tariffs would reduce imports into Canada, which would cause the net supply of dollars in the foreign exchange market to rise.
C) The tariffs would reduce imports of ice cream into Canada, but would reduce Canadian exports of other goods by an equal amount.
D) The tariffs would reduce imports of ice cream into Canada, but would increase Canadian exports of other goods by an equal amount.

Question

Quizplus · Accepted Answer

The tariffs would reduce imports of ice cream into Canada, but could lead to retaliatory measures or reduced demand for Canadian exports, balancing the trade effect.

Suppose That Canada Places Higher Tariffs on Imports of Ice