Assume that the U.S. places a strict quota on goods imported from Chile and that Chile does not retaliate. Holding other factors constant, this event should immediately cause the U.S. demand for Chilean pesos to ____ and the value of the peso to ____.
A) increase; increase
B) increase; decline
C) decline; decline
D) decline; increase

Question

Quizplus · Accepted Answer

A strict quota on goods imported from Chile would reduce the need for U.S. businesses and consumers to exchange dollars for Chilean pesos to pay for those goods, leading to a decline in demand for the peso and consequently a decline in its value.

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