Protectionism

Question 1

What is protectionism?

Answer 1

It is the process of restricting / limiting the entry foreign goods coming into the country. It is adopted in order to protect domestic producers from foreign competition.

Question 2

What are methods of protectionism?

Answer 2

01) Tariffs - A tax incidence on imports
02) Quota- A physical restriction o the number of goods, no tax revenue to the government
03) Embargo - Complete restriction on a good from a country, perhaps illegal drugs, or due to war
04) Exchange rate control - The central bank of a country regulates the cash inflows and outflows of a country
05) Red tape/ Administrative burden - Imposing excessive administration burden (time-consuming long forms to fill)

Question 3

What are the factors in favor of protectionism?

Answer 3

• Protection of infant industries
  -Protection of sunset industries
• Raising employment
• Avoid unfair foreign competition / DUMPING
  -protection of industries from the exploitation of labor
• to Correct BOP disequilibrium

Question 4

What are the arguments against protectionism?

Answer 4

• encourage inefficient producers
  -Customers may have to pay higher prices for domestic goods than if they were to import them
• At the time of removal, economic problems may arise
• The local industry may try to monopolize the market and provide poor-quality products, due to the lack of foreign competition.
• New technology may not come to the market.

Question 5

What is bilateral trade?

Answer 5

Trade between two countries

Question 6

What is multilateral trade?

Answer 6

Trade between several countries

Question 7

What is globalisation?

Answer 7

This is the integration of the world’s economies into one international market.

Question 8

What are advanatges of globalisation ?

Answer 8

• Resources of different countries are used for producing goods and services that they have a comparative advantage in/most efficient in.
• Consumers can experience a wider variety of goods
• companies get access to wider markets
• promotes understanding, goodwill and networking
• Businesses and investors. get wider opportunities for investment

Question 9

What are the disadvantages of globalisation?

Answer 9

-developed countries can interrupt the development of developing countries
- economic depression in one country can trigger adverse reactions across the globe
- Can increase the spread of communicable diseases
- Companies may face greater competition

Question 10

What does the tariff diagram look like?

Answer 10