Suppose That Canada Imposes an Import Quota on Automobiles

question 64

Multiple Choice

Suppose that Canada imposes an import quota on automobiles. Which of the following describes the most likely effects of this quota?

• A)The quota would cause the real exchange rate of Canadian dollars to appreciate, but it would not change the real interest rate in Canada.
• B)The quota would cause the real exchange rate of Canadian dollars to appreciate and the real interest rate in Canada to increase.
• C)The quota would cause the real exchange rate of Canadian dollars to depreciate and the real interest rate in Canada to decrease.
• D)The quota would cause the real exchange rate of Canadian dollars to depreciate, but it would not change the real interest rate in Canada.

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Definitions:

Agent

An individual or entity authorized to act on behalf of another person or entity in contractual or legal matters.

Liquidation

The process of bringing a business to an end and distributing its assets to claimants, often in the context of bankruptcy.

Corporate Assets

Items of value owned by a corporation, including physical items as well as intangible rights and resources.

Distributed

The process or state of spreading or dispersing something more widely.