Ceteris paribus,a decrease in tariffs in both the factor market and the product market will cause
A)An increase in the price level and a decrease in unemployment.
B)An increase in the price level and an increase in unemployment.
C)A decrease in the price level and a decrease in unemployment.
D)A decrease in the price level and an increase in unemployment.

Question

Quizplus · Accepted Answer

When tariffs decrease in both the factor and product market, it leads to an increase in competition which drives down prices. This, in turn, encourages firms to increase their output and demand more factors of production, leading to a decrease in unemployment. Hence, the choice C is the best answer.

Ceteris Paribus,a Decrease in Tariffs in Both the Factor Market