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 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Tariff rates

Tariffs are a tax on imports and have traditionally been introduced to protect Australian producers and 'save' Australian jobs by diverting demand away from the purchase of imports and towards local (import competing) production.  This policy can have short term benefits for the Australian economy in terms of reducing imports, boosting AD, real GDP and thereby assisting in the achievement of economic growth, full employment, equity in the distribution of income and external stability.  However, it is generally recognised to have longer term negative supply side effects that are characterised by lower levels of productivity or efficiency (technical), a higher cost structure for the economy and a misallocation of resources.  This results in higher inflation (making it more difficult to achieve the low inflation goal) and a negative impact on all of the other government goals.  The effects on the other goals are the same as that for a reduction in productivity. Tariffs are also discussed in the context of Aggregate Supply policies and free trade vs protection.

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