Question

Suppose a national election sees an increased push for tariffs on foreign goods and increased consumption of goods "Made in the U.S.A." What's the immediate impact on exports and imports?

A. exports increase, imports decrease

B. exports decrease, imports unchanged

C. exports increase, imports increase

D. exports unchanged, imports decrease

E. exports decrease, imports increase

F. exports decrease, imports decrease

Answer 1

D. exports unchanged, imports decrease is the correct option.

The reason behind the correct option is that the increase in the tariffs on foreign goods, increases the prices of imported goods. When the price of imported goods rise, their demand falls. It leads to a reduction in the imports of a country. Also, there is no immediate effect of individuals in U.S.A., increasing their consumption of goods “Made in the U.S.A”, on the exports.

Therefore, when the national election sees an increased push for tariffs on foreign good and increased consumption of goods “Made in U.S.A.”, the quantity of imports decrease and the quantity of exports remain unchanged.