What is meant by effective rate of protection?
In economics, the effective rate of protection (ERP) is a measure of the total effect of the entire tariff structure on the value added per unit of output in each industry, when both intermediate and final goods are imported.
What is the effective rate of protection formula?
Then the effective rate of protection is 25% (=((27500-15000)/10000))-1). Perhaps even more important, suppose instead a 10% tariff is applied to the imported inputs into motorcycle. Then the effective rate of protection is -15% (=((25000-16500)/10000)-1).
What is the usefulness of the concept of effective protection measured?
The concept of effective rate of protection attempts to measure the rate of protection in case of specified home industries by taking into account only the direct effects of tariff upon those industries. The tariffs also have certain indirect effects including the counterveiling measures adopted by foreign countries.
How do you calculate the effective rate of protection quizlet?
Take the value and divide it by value added during free trade and multiply value by 100 to get percentage. For each material, take the tariff of the final good and subtract it by the material tariff. Then multiply that value by the material cost over the value added in free trade.
What is the meaning of effective rate?
The effective interest rate (EIR), effective annual interest rate, annual equivalent rate (AER) or simply effective rate is the percentage of interest on a loan or financial product if compound interest accumulates over a year during which no payments are made.
What is the purpose of effective rate?
Effective interest rate is the one which caters the compounding periods during a payment plan. It is used to compare the annual interest between loans with different compounding periods like week, month, year etc. In general stated or nominal interest rate is less than the effective one.
What is the difference between nominal and effective rate of protection?
When no or lower tariffs are applied on imported inputs than on the final imported product, the rate of protection, called as the effective rate of production, exceeds the nominal tariff rate.
What is effective protection rate and nominal tariff rate?
measurement of tariff effectiveness
The nominal rate of protection is the percentage tariff imposed on a product as it enters the country. For example, if a tariff of 20 percent of value is collected on clothing as it enters the country, then the nominal rate of protection is that same…
What is the effective rate of a bond?
The effective interest rate of a bond is the rate that will discount both the bond’s future interest payments and the bond’s maturity value to a present value that is equal to the bond’s current market value. If the market interest rate increases, the present value (and the market value) of the bond will decrease.
What are the reasons for protection?
The main arguments for protection are:
- Protect sunrise industries.
- Protect sunset industries.
- Protect strategic industries.
- Protect non-renewable resources.
- Deter unfair competition.
- Save jobs.
- Help the environment.
- Limit over-specialisation.
What are the instruments of protection?
Direct protection instruments affect commodities as they enter international trade either as imports or exports. The most common ones are tariffs, import and export quotas and export taxes and subsidies.
What is the importance of protection in developing countries?
Quote from video:
What is the difference between nominal and effective rate of protection?
When no or lower tariffs are applied on imported inputs than on the final imported product, the rate of protection, called as the effective rate of production, exceeds the nominal tariff rate.
What is effective protection rate and nominal tariff rate?
measurement of tariff effectiveness
The nominal rate of protection is the percentage tariff imposed on a product as it enters the country. For example, if a tariff of 20 percent of value is collected on clothing as it enters the country, then the nominal rate of protection is that same…
What is the effective rate of a bond?
The effective interest rate of a bond is the rate that will discount both the bond’s future interest payments and the bond’s maturity value to a present value that is equal to the bond’s current market value. If the market interest rate increases, the present value (and the market value) of the bond will decrease.
What is effective rate in loan?
The effective interest rate is the usage rate that a borrower actually pays on a loan. It can also be considered the market rate of interest or the yield to maturity.
Who uses effective interest rate?
Investors and analysts often use effective interest rate calculations to examine premiums or discounts related to government bonds, such as the 30-year U.S. Treasury bond, although the same principles apply to corporate bond trades.
What is the difference between interest rate and effective interest rate?
An interest rate takes two forms: nominal interest rate and effective interest rate. The nominal interest rate does not take into account the compounding period. The effective interest rate does take the compounding period into account and thus is a more accurate measure of interest charges.