ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: An import restriction, by definition, reduces the supply of a good. A tariff on washing machines will reduce the number of washing machines imported into the country, which will reduce the overall supply. Similarly, a limit on how many bananas can be imported will limit the supply.

Detailed explanation-2: -A weaker domestic currency stimulates exports and makes imports more expensive; conversely, a strong domestic currency hampers exports and makes imports cheaper. Higher inflation can also impact exports by having a direct impact on input costs such as materials and labor.

Detailed explanation-3: -The effects of trade barriers can obstruct free trade, favor rich countries, limit choice of products, raise prices, lower net income, reduce employment, and lower economic output. The law is most commonly used as a trade barrier due to the significant control the government has over it.

Detailed explanation-4: -Exchange Rates, Foreign Currency Reserves, and Inflation Exchange rates: A domestic currency that has appreciated significantly raises the cost of exported goods and can leave exporters priced out of global markets. This may pressure a nation’s trade balance.