Suppose That Canada Imposes an Import Quota on Automobiles

question 60

Multiple Choice

Suppose that Canada imposes an import quota on automobiles.Which statement best 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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