Question

an import tarrif can induce FDI . Explain

Answer 1

An import tariff can get to increase the prices of that product in the market with which the demand for the product falls. With this inorder to induce demand for the product, the product must be made in the country itself to induce the demand again on the whole with the reduction of prices. With this production units with be set up in the country and capital flows inside the country through the form of FDI. Therefore in this way, if an import tariff , it induces FDI to flow inside the country.