Question
Could you explain the difference between Nominal and Effective tariff rates? (This question is part of my International Economics's postgrad unit). The lecturer has explained
Could you explain the difference between Nominal and Effective tariff rates?
(This question is part of my International Economics's postgrad unit). The lecturer has explained this in the slides, but I dont quite understand what he has written, therefore I am asking you).
According to the lecture slides, Nominal applies to value of finished goods/products. However, effective tariff rates takes into account not only nominal tariff on finished goods but any tariff applieid to imported inputs. (I dont get what is imported input?).
If tariff on finished product is less than tariff on imported input :
-Effective rate of protection is less than nominal tariff(may even be negative)
-Tariff protects domestic suppliers of raw materials more than domestic manufactures.
If tariff on finished product exceeds tariff on imported input-
-Effective tariff exceeds nominal tariffs.
Could you please better explain what has been stated in the slide? I dont get it :(
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