If a small country imposes a tariff on an imported good, its terms of trade will ?
Correct answer: C. not change
- A. improve
- B. worsen
- C. not change
- D. any of these
Explanation
A small country takes the world price as given, so its tariff cannot reduce the foreign export price or alter its terms of trade. The tariff changes the domestic price but leaves the terms of trade unchanged.
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