Tariffs artificially________ goods' prices and________ goods' demand.

Question

BlackTom AI · Accepted Answer

Tariffs are taxes imposed on imported goods, and they have two main effects described in the prompt: the price of foreign (imported) goods tends to rise for consumers, and the demand for those foreign goods tends to fall as price increases.
Option 1: "raise domestic; raise domestic" would imply tariffs cause both price and demand for domestic goods to rise, which is mismatched because tariffs target imports and typically do not raise domestic goods’ prices directly nor increase domestic demand as a result. This confuses the direction of impact and the target of the policy.
Option 2 (correct): "raise foreign; lower foreign" correctly captures the standard effects—tariffs raise the price of foreign (imported) goods and reduce their demand because higher prices deter buyers, shifting the market away from imports.
Option 3: "lower import; raise export" contradicts the mechanism of tariffs entirely. Tariffs do not lower the price of imports; they increase them, and they do not directly cause export prices or demand to rise as a primary effect. This option misstates both the market affected and the direction of change.
Option 4: "lower foreign; lower foreign" suggests tariffs reduce both the price and the demand for foreign goods, which is inconsistent with how tariffs function. Tariffs increase, not decrease, the price of foreign goods; the corresponding demand effect would be a reduction, not a reduction in price.
Option 5: "lower domestic; raise foreign" implies tariffs reduce the price of domestic goods and increase foreign demand or price, which does not align with the typical policy outcome either. Tariffs don’t generally lower domestic prices as a direct effect, and they do not purposefully increase foreign demand.
In summary, the only choice that aligns with the standard economic impact of tariffs on imported goods is that tariffs raise foreign prices and lower foreign demand.

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Tariffs artificially goods' prices and goods' demand.

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