Country X places a tariff of 20% on steel products imported from country Y. Country Y retaliates with a 20% tariff on computers imported from country X.
What is a certain economic consequence of these actions?
1 )
The balance of payments of country X and country Y will remain unchanged.
2 )
The exchange rate value on which trade between the two countries is based will be maintained.
3 )
The profits and employment of domestic firms in both countries will be preserved.
The volume of bilateral trade between country X and country Y will be reduced.
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