Understanding Subsidies in Global Trade

What is a subsidy primarily intended to do?

• Increase government revenue

• Encourage foreign investment

• Support local businesses in the global market

• Reduce international trade

Which of the following is an example of an export subsidy?

• Low-interest loans for small businesses

• Government-funded research for new technologies

• Direct cash payments to domestic companies to sell abroad

• Tax breaks for local farmers

How do production subsidies benefit domestic industries?

• By reducing the cost of imports

• By encouraging production regardless of sales location

• By increasing export tariffs

• By providing free marketing services

Why might a government subsidize research and development?

• To increase short-term profits

• To foster long-term innovation and competitiveness

• To reduce the number of local businesses

• To discourage foreign investment

What is one reason countries use subsidies?

• To increase dependency on imports

• To protect strategically important industries

• To reduce government spending

• To decrease employment rates

How can subsidies lead to trade distortion?

• By increasing the cost of production

• By encouraging foreign companies to invest

• By giving domestic companies an artificial advantage

• By reducing the number of local competitors

What is a potential consequence of overproduction due to subsidies?

• Increased local prices

• Dumping of excess goods in foreign markets

• Higher import tariffs

• Reduced domestic employment

Which of the following is an example of a trade dispute caused by subsidies?

• A conflict over aircraft subsidies between the US and EU

• A country reducing its export tariffs

• A collaboration between two countries on renewable energy

• A country increasing its import quotas

What is a key challenge in balancing subsidies and global trade?

• Ensuring local industries are not supported

• Maintaining fair international competition

• Reducing innovation in national industries

• Increasing dependency on foreign goods

What is a potential negative consequence of subsidies on global markets?

• Reduced domestic production

• Higher international trade tariffs

• Distorted global markets

• Increased foreign investment