The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market. This strategy promised to help economic growth by incubating domestic industries. New Japanese industries could count on a known local demand and would be protected from competition from abroad by tariffs and other barriers. It also ensured steady profits to local manufacturers as they had enough control over the prices of commodities in absence of foreign competition. The program could reduce the amount of imports and therefore improve the nation's balance of trade. Which of the following, based on the passage above, could be a weakness in this economic strategy?

A A protectionist policy will get Japan involved in warfare.

B Fast growth of small industries will create a class of millionaires and increase the inequality of income.

C Import constraints keep domestic prices high and impose a burden on consumers.

D Quotas are more regressive than tariffs.

Solution

Correct Answer: Option C

Solution

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