Week 5 Discussion Economics.docx

Week 5 Discussion Economics.docx - Week 5 Discussion...

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Week 5 Discussion Economics 1. Describe what a tariff is and its economic effects. A tariff is a tax on goods that are imported (Mankiw. pg. 173). Radcliffe states that a tariff adds to the cost of imported goods and it is one of the several trade policies that a country can enact (Radcliffe, 2018). A tariff raises the price for consumers which lead to the decline in imports. Before a tariff is imposed the domestic price equals the world price. If tariff is imposed it raises the price of imported goods above the world price. The tariff causes the quantity of imports to reduce and moves the domestic market closer to its equilibrium without trade (Mankiw. pg. 173). Domestic sellers are better off if tariff rises while the domestic buyers get the worst end of deal. 2. What are the differences between unilateral and multilateral approaches to achieving free trade? The unilateral approach removes its trade restriction on its own. Great Britain, Chile, and South Korea have taken this approach in the past and recent years. The multilateral approach
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