What effect do protectionist measures have on the rate of inflation?
A) Permanent increases
B) Temporary increases
C) Permanent reductions
D) Temporary reductions
E) Temporary or permanent increases depending on i) whether quotas or tariffs are used and ii) the market power of domestic suppliers in the import-competing industry.

Question

Quizplus · Accepted Answer

Protectionist measures, such as tariffs and quotas, can lead to temporary increases in inflation as they raise the cost of imported goods, which can then lead to higher prices for consumers. However, these effects are typically not permanent as markets adjust over time.

What Effect Do Protectionist Measures Have on the Rate of Inflation