ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In May 1981, with the American auto industry mired in recession, Japanese car makers agreed to limit exports of passenger cars to the United States. This “voluntary export restraint” (VER) program, initially supported by the Reagan administration, allowed only 1.68 million Japanese cars into the U.S. each year.

Detailed explanation-2: -A voluntary export restraint (VER) is a self-imposed trade restriction whereby an exporting country limits the number of goods of a particular nature that it can export to a specific country or region. VERs are imposed by the exporting country at the request of the importing country.

Detailed explanation-3: -Governments three primary means to restrict trade: quota systems; tariffs; and subsidies. A quota system imposes restrictions on the specific number of goods imported into a country. Quota systems allow governments to control the quantity of imports to help protect domestic industries.

Detailed explanation-4: -Quotas. A quota is a direct restriction on the total quantity of a good or service that may be imported during a specified period. Quotas restrict total supply and therefore increase the domestic price of the good or service on which they are imposed.