Economics (AS & A Level) · Oct / Nov 2021 · Paper 13 · Question 24

Country X places a tariff of 20% on steel products imported from country Y. Country Y retaliates with a 20% tariff on computers imported from country X. What is a certain economic consequence of these actions?

1. AThe balance of payments of country X and country Y will remain unchanged.
2. BThe exchange rate value on which trade between the two countries is based will be maintained.
3. CThe profits and employment of domestic firms in both countries will be preserved.
4. DThe volume of bilateral trade between country X and country Y will be reduced.

As printed in the paper