Florida Teacher Certification Examinations (FTCE) Subject Area Practice Test

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Prepare for the FTCE exams with quizzes and multiple choice questions. Study effectively with hints and explanations to boost your score!

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If the US eliminates its tariffs on cars while Japan maintains theirs, what will happen to the price of imported cars in the US?

Rise, and demand for US exports will increase
Decline, and demand for US exports will decline
Remain the same, with no effect on exports
Rise, but with no impact on demand

The correct answer is: Decline, and demand for US exports will decline

When the US eliminates tariffs on imported cars, the cost of importing cars from countries like Japan decreases because tariffs typically add to the price consumers pay. As a result, the price of imported cars in the US would decline, making them more affordable for consumers. However, since Japan maintains its tariffs, domestic cars in Japan remain more expensive for US consumers compared to if Japan were to also eliminate those tariffs. Consequently, while the price of imported cars decreases, this situation can lead to a decline in demand for US exports, particularly in the automotive sector. This is due to the fact that if consumers in the US can purchase cheaper imported vehicles, they may be less inclined to buy US-made vehicles, thus reducing demand for American automotive exports overall. This interplay of price and demand illustrates how tariff policies directly affect pricing and international trade dynamics.