I was hesitating b/w A and E but A seems best
A) If there is animosity with other nations, how can we say that balance of trade will be positive? What if there is nowhere else to export because other countries will impose the same tariffs?
B) as blunt as it could sound, we are solely interested in a positive balance of trade, not in the distribution of wealth
C) again, what consumers pay for the product is not of concern as long as the products sell and the aggregate economy is improved
D) we are not interested in the difference b/w the two
E) yes, we know the demand since the products are protected against foreign competition. As the excerpt says, there is a known local demand because there is little foreign competition.
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Best Regards,

Paul

The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market. This strategy promised to help economic growth by incubating domestic industries. New Japanese industries could count on a known local demand and would be protected from competition by tariffs and other barriers. The program could reduce the amount of imports and therefore improve the nation's balance of trade.

Which of the following, based on the passage above, is a weakness in this economic strategy?

A) A protectionist policy will create animosity among other nations.

B) Fast growth of small industries will create a class of millionaires and increase the inequality of income.

C) Subsidies and import constraints keep domestic prices high and impose a burden on consumers.

D) Quotas are more regressive than tariffs.

E) The demand for the products made by the incubated industries would not be kn

The policy described above would not work if other nations impose a similar ban on Japanese good and thus their exports. this will not help to a balance of trade as suggested. secondly anything that will affect local demand will definately expose the flaw in this augument.

A is wrong because animosity does not mean countries will impose similar sanction on Japan
B is out of the discussion
C affects demands and therefore could be the answer
D is out of the discussion too
E is not right either