A reduction in Pakistan's import tariff on a raw material used by local factories is most likely to:
Correct answer: A. Lower production costs for those factories
- A. Lower production costs for those factories
- B. Raise the cost of the imported raw material
- C. Reduce the supply of the raw material immediately
- D. Guarantee a rise in the government's tariff revenue
Explanation
A lower tariff reduces the tax-inclusive price of the imported input, which can lower production costs for firms using it. The final effects on output, prices and tariff revenue depend on demand and import responses, so a revenue increase is not guaranteed.
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About Economy of Pakistan
Pakistan's economy is examined through agriculture, industry, services, trade, remittances, employment, population, poverty and regional development. The topic also covers GDP and national income, inflation, fiscal and monetary policy, taxation, public debt, the balance of payments, energy constraints and structural challenges, including the role of the State Bank and development planning.
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