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Chapter 21: Q.8 (page 522)

How does the cost of 鈥渟aving鈥� jobs in protected industries compare to the workers鈥� wages and salaries?

Short Answer

Expert verified

Wages would fall is the cost of 鈥渟aving鈥� jobs in protected industries compared to the workers鈥� wages and salaries.

Step by step solution

01

Step 1. Meaning

A protected industry is the industry for which trade policies are introduced that allowed the government of the country to impose tariffs on foreign goods and services to protect or boost the domestic production of goods and services.

02

Step 2. Explanation 

When consumers have to pay a higher wage in the protected industry, they would spend less on that industries product. This would reduce the demand. Reduction in demand would cause demand for labor to decline which would further reduce wages.

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