Which one of the following is an example of a trade barrier?[2011 (T-2)]a)Tax on exportb)Tax on importsc)Tax on local traded)High income taxCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Understanding Trade Barriers
Trade barriers are measures that governments take to control the amount of trade across their borders. These barriers can affect international trade and influence the economy significantly.
Types of Trade Barriers
- Import Taxes (Tariffs):
- Taxes imposed on goods brought into a country.
- They make imported goods more expensive, encouraging consumers to buy domestic products instead.
- This is a common method to protect local industries from foreign competition.
- Export Taxes:
- Taxes on goods sent out of the country.
- Less common and usually used to manage the supply of certain resources.
- Local Taxes:
- Taxes on goods sold within a country.
- These do not directly affect international trade but can impact local industry competitiveness.
- High Income Tax:
- This is not considered a trade barrier.
- It affects individuals and businesses but does not specifically address trade between countries.
Why Tax on Imports is a Trade Barrier
- Protectionism:
- Import taxes are primarily used as protectionist measures.
- They aim to make imported goods less attractive compared to locally produced goods.
- Economic Implications:
- These taxes can lead to higher prices for consumers and can also lead to trade disputes between nations.
In conclusion, the correct answer is option 'B' (Tax on imports) because it represents a direct measure that restricts trade by increasing the cost of foreign goods, thereby acting as a barrier to free trade.

Answer

The correct option that refers to a trade barrier is: 'Tax on imports'

A trade barrier is a measure or policy implemented by a government that restricts or regulates the trade of goods or services between countries. Trade barriers may be put in place for a variety of reasons, such as to protect domestic industries, to enforce health and safety regulations, or to achieve political or strategic goals.

One example of a trade barrier is a tax on imports, which is a tax that is applied to goods that are imported into a country. This can make imported goods more expensive and less competitive with domestic products, which can protect domestic industries and increase demand for local goods.

Option (a) refers to a tax on exports, option (c) refers to a tax on local trade, and option (d) refers to high income tax.

Answer

Trade Barriers:

Trade barriers are government-imposed restrictions on international trade that aim to protect domestic industries and markets. These barriers can take various forms, such as tariffs, quotas, and taxes. Among the given options, the example of a trade barrier is:

Tax on imports (Option B): This refers to a tax imposed on goods and services imported into a country. It increases the cost of imported goods, making them less competitive compared to domestic products. By levying a tax on imports, the government aims to protect domestic industries, generate revenue, or correct trade imbalances.

Other options provided do not directly relate to trade barriers:

Tax on export (Option A): This refers to a tax imposed on goods and services exported from a country. While it can affect the competitiveness of exported goods, it does not restrict imports or protect domestic industries.

Tax on local trade (Option C): This refers to a tax imposed on domestic trade within a country. It does not directly affect international trade or impose barriers on imports or exports.

High income tax (Option D): While high income tax may impact consumer purchasing power and overall economic conditions, it is not a specific trade barrier that restricts international trade.

Therefore, the correct answer is Option B: Tax on imports as it exemplifies a trade barrier.

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