Discuss if and how a country can have a policy of free trade while also having
various trade barriers in place
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FOREIGN TRADE POLICY [85]
4.3.1 BASIC ASPECTS
Foreign trade policy can provide powerful incentives or disincentives to production, through its influence on the prices and quantities of competing products imported into the country and through its effects on domestic prices received by exports. Policies that drive up import prices in the domestic market are said to provide economic protection. The main instruments of trade policy are tariffs and quotas on the import side, and various types of incentives when it comes to exports. In some cases, a combination of quotas and tariffs (known as “tariff quotas”) is used, whereby tariffs are increased when imports exceed a set amount
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