What are some of the economic effects of a tariff?
A) Wealth is redistributed from wealthy nations to poor nations,and taxes fall.
B) Unemployment and inflation rates both fall.
C) A decrease in trade reduces the productivity of capital and labor.
D) Trade remains the same in the long run,and GDP rises in the nation that enacts the tariff.

Question

Quizplus · Accepted Answer

Tariffs are taxes on imports, which can lead to decreased trade as foreign products become more expensive for consumers. This reduction in trade can result in a decrease in the productivity of capital and labor, making it harder for businesses to sell their products internationally and diminishing economic growth. In addition, tariffs can lead to retaliatory measures from the affected countries, resulting in a trade war that could potentially harm both economies. Option A is incorrect because tariffs typically benefit the nation implementing it by protecting domestic industries, so there is no wealth redistribution from wealthy to poor nations. Option B is incorrect because tariffs can lead to increased prices for consumers, which could cause inflation, and decreased trade can result in job losses. Option D is incorrect because, in the long run, the GDP of the nation that implements the tariff could be negatively impacted by the reduction of trade and any ensuing trade wars.

What Are Some of the Economic Effects of a Tariff