What's it:Â An import tariff is a tax imposed on the price of imported goods. The government usually charges tariffs as a percentage of the price of imported goods. Alternatively, the tariff is levied as a fixed cost for each unit of goods imported,
Economic Context
Customs Union: Trade Boost & Cooperation (Free Trade, Tariffs, Pros, Cons)
What's a customs union? Imagine a group of neighboring countries taking economic integration to the next level. This involves ditching trade barriers amongst themselves, allowing goods and services to flow freely without the burden of customs duties
The Loanable Funds Market: Understanding Borrowing and Lending in the Economy
The loanable funds market acts as the engine that drives borrowing and lending within an economy. Imagine the economy as a giant lending circle. People set aside money they don't spend (savings), businesses need funds to grow, and the government
Trade Protection: Shield Domestic Economy (Reasons, Pros, Cons & Types)
What's it:Â Trade protection is a government policy used in international trade to limit the flow of exports and imports of goods and services. Protection takes various forms, such as import tariffs, subsidies, quotas, labeling, product safety, and
Market Failure: Types, Effects, and Solutions
What's it: Market failure refers to a condition in which the market mechanism doesn't work, thus creating inefficiency in the market. Demand, supply, and price aren't in equilibrium. As a result, markets fail to allocate economic resources most
Laissez-faire: Concept, Pros and Cons
What's it: Laissez-faire is a political-ideological concept that rejects government intervention on the economy. This term, in French, means "let it be." Its supporters see the state intervention is a barrier to economic growth and
Austerity Policy: Balancing Debt vs. Growth (Pros & Cons)
What's it: Austerity policy is an action by the government to reduce government debt. The government usually adopts it when debt is too high, hence weighing economic performance. High debt tends to be out of control. It is dangerous and
Pure Floating Exchange Rate: Flexibility & Volatility (Pros, Cons)
What's it? A pure floating exchange rate, or free-floating exchange rate, is a system of exchange rates in which the value of a domestic currency against a foreign currency moves according to a market mechanism. The market mechanism is the
Externalities: Meaning, Types, and Solutions
What's it: Externalities are costs or benefits of economic activities borne by third parties who are not involved in it. They are not reflected in the final cost or benefit of the goods or services produced.Economists view externalities as
Balance of Payments: Understanding a Country’s Economic Footprint
Balance of payments acts as a comprehensive snapshot of a country's economic activity on the world stage. It's essentially a double-entry bookkeeping system that tracks all financial transactions between a country and the rest of the world over a
Currency Crisis Explained: Causes, Impacts & Solutions
What's it:Â A currency crisis is a situation in which the exchange rate of a currency falls, causing a sharp decline in foreign reserves. The fall was possible due to a brief bout of speculation on the foreign exchange market. Simultaneously, the
Import Quota: Protection vs. Price Hikes – Types, Pros and Cons
What's it? An import quota is an import policy that limits the quantity of product imports over a certain period. The government implemented it to protect domestic industries that were vulnerable to pressure from imported products. It is also