Author: Timea

Another form of government interference with international trade. Import quotas set a limit on how many units can be imported. For example a 100,000 vehicle quota: Japanese producers would only…

Tariffs are not taxes on foreign producers, but on domestic citizens. We can see that in our example where the Japanese producers still get their $10,000, but American consumers have…

A tariff (or a duty) is a tax that the government places on foreign imports. Although the government might levy a tariff for the simple purpose of raising more revenue,…

An economic philosophy or doctrine which holds that a country grows rich by encouraging exports and discouraging imports. According to mercantilism, a trade surplus (exporting more than importing) is good…

When the government levies an income tax, it requires individuals and corporations to transfer some of their income in a particular period to the government. They are usually expressed as…

Under a sales tax, the government mandates that a portion of the payment on certain transactions is owed to the government. E.g. if there is a 5% sales tax on…

Traditionally there are three main ways through which the government raises money: taxation, budget deficits, inflation. Taxation is when the government decrees that individuals and corporations must pay money to…

Government spending Suppose the government takes $100 million to build a bridge. This takes up scare labor and materials from the market, which could have been used elsewhere. But the…

An approach to economic policy that seeks to avoid the alleged flaws of pure capitalism and pure socialism. An interventionist government will not tolerate the outcomes of a purely free…