Question

1) A decrease in an import tariff will result in ___

A) an increase in price, but a decrease in quantity purchased.

B) a decrease in price and a decrease in quantity purchased.

C) a decrease in imports, but an increase in domestic production.

D) an increase in imports, but a decrease in domestic production

2) The largest component of GDP is

A) tax revenue

B)the nation's capital stock

C) CAPX spending

D) consumer spending

E) government spending

3) When industrialized nations permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured imports, this is referred to as the _____

A) Tariff escalation effect

B) nominal tariff effect

C) protective tariff effect

D) tariff-quota effect

4) The Fed uses sterilization to ______

A) flatten the yield curve

B) meet its short term interest rate, money supply and fed funds targets

C) offset the inflationary effect of excess capital flowing into domestic monetary base

D) add reserves to the banking system

Answer 1

answer 1 option (d) increase in imports and decrease in domestic production

As the tariff on imports reduces than the price of the the goods falls as the price falls there will be more consumer demand but because the price got reduced there will be less production in domestic market because of relatively cheaper imports the consumer will focus on import goods which will increase the imports.

Answer 2 option (d) consumer spending

As we know because of the population of country there are more buyers than anything so the more buyers the more will be consumer spending so it is the largest component of the gdp.

Answer 3. Option (A) tariff escalation

In this effect tariff is imposed more on semi finished goods and higher on manufactured goods and much lower to the raw materials.

Answer 4. Option (c) offset the inflationary effect

When there is excess capital flowing in the market the feds intervenes in the market in which the central bank sales the financial asstes by which the excess capital flow in the market goes to them and because of that they offset the inflationary effect of the excess flow of capital