Problem : Why would a government impede free trade?

A government might interfere with free trade to help developing domestic industries.

Problem : How do quotas work?

A quota system limits the specific number of goods that may be imported into a country.

Problem : How do tariffs work?

Tariffs are fees paid on imported goods. Tariffs increase the price that consumers pay for the good, which reduces the quantity of the good demanded and makes the price more in line with the price charged by domestic producers.

Problem : How do subsidies work?

Subsidies are grants given to domestic industries to help them develop and compete with foreign producers.

Problem : What are two harmful effects of a large trade deficit?

Harmful effects of a large trade deficit include foreign ownership of domestic industry and a tandem budget deficit.

Popular pages: International Trade