Rising tariffs increase domestic production, but reduce domestic consumption.

Question

Quizplus · Accepted Answer

When tariffs are imposed on imported goods, it becomes more expensive to bring them in, making domestic production relatively cheaper. This incentivizes domestic producers, who may increase production to meet demand previously satisfied by imports. However, as the cost of imported goods goes up, domestic consumers may reduce their consumption, which can decrease overall demand for goods and services.

Rising Tariffs Increase Domestic Production, but Reduce Domestic Consumption