Question

Suppose the United States decides to reduce export subsidies on U.S. agricultural products, but it does not decrease taxes or increase any other government spending. What is the likely impact of this decision on the U.S. agricultural industry?

1) The U.S. agricultural industry will experience a decrease in production and exports.
2) The U.S. agricultural industry will experience an increase in production and exports.
3) The U.S. agricultural industry will remain unaffected by this decision.
4) The impact on the U.S. agricultural industry cannot be determined based on the information provided.

Answer 1

Reducing export subsidies on U.S. agricultural products, without decreasing taxes or increasing government spending, will likely lead to a decrease in production and exports by the U.S. agricultural industry.

Step-by-step explanation:

The likely impact of reducing export subsidies on U.S. agricultural products without decreasing taxes or increasing government spending would be a decrease in production and exports by the U.S. agricultural industry.

Export subsidies are payments or incentives given by the government to firms to promote industry sectors. By reducing these subsidies, the U.S. agricultural industry would become less competitive in the global market, resulting in a decrease in production and exports.

This decision would make it more difficult for U.S. agricultural products to compete against products from countries that have a comparative advantage in agricultural production, such as Brazil. As a result, the U.S. agricultural industry would likely experience a decrease in production and exports.