Question

In order to encourage the agricultural industry, the French government provided low-interest loans for the purchase of seeds and fertilizers. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the French government?

Answer 1

Answer:

The French government is using the trade policy instrument of subsidy to encourage the agricultural industry.

Explanation:

Seeds and fertilizers are inputs in the agricultural industry. Providing low-interest loans is a form of subsidizing the purchase of inputs for production.

Tax reductions and cash grants are also ways to subsidize production as the expenditures of agricultural businesses are encouraged with cash grants and profits are increased due to paying less tax.