Which term is used to describe a policy instrument that raises the cost of imported goods to protect domestic industries?

Which term is used to describe a policy instrument that raises the cost of imported goods to protect domestic industries?

• A. Subsidy
• B. Standards
• C. Tariff
• D. Exchange Rate

Answer: (C)

Raising the cost of imported goods to protect domestic industries is achieved through a tariff. A tariff is a tax on imports that makes foreign products more expensive in the domestic market. That higher price can shift demand toward domestically produced goods, helping local industries compete, protect jobs, and sometimes raise government revenue. Subsidies provide financial assistance to domestic producers to lower their costs or boost competitiveness, which helps with domestic production without increasing import prices. Standards impose requirements that imports must meet, potentially limiting them, but they don’t inherently add a tax to imports. Exchange rate changes alter the price of imports by making the domestic currency stronger or weaker; this is a broader macroeconomic factor rather than a targeted policy to raise import costs.

Raising the cost of imported goods to protect domestic industries is achieved through a tariff. A tariff is a tax on imports that makes foreign products more expensive in the domestic market. That higher price can shift demand toward domestically produced goods, helping local industries compete, protect jobs, and sometimes raise government revenue.

Subsidies provide financial assistance to domestic producers to lower their costs or boost competitiveness, which helps with domestic production without increasing import prices. Standards impose requirements that imports must meet, potentially limiting them, but they don’t inherently add a tax to imports. Exchange rate changes alter the price of imports by making the domestic currency stronger or weaker; this is a broader macroeconomic factor rather than a targeted policy to raise import costs.