Assume that Canada places a strict quota on goods imported from the United States and that the United States does not retaliate. Holding other factors constant, this event should immediately cause the supply of Canadian dollars to be exchanged for U.S. dollars to ____ and the value of the Canadian dollar to ____.

Question

Assume that Canada places a strict quota on goods imported from the United States and that the United States does not retaliate. Holding other factors constant, this event should immediately cause the supply of Canadian dollars to be exchanged for U.S. dollars to ____ and the value of the Canadian dollar to ____.​

Quizplus · Accepted Answer

If Canada places a strict quota on goods imported from the United States, this will decrease the demand for US dollars in Canada, as Canadian firms and individuals will need to purchase fewer US goods. This will result in a decrease in the supply of Canadian dollars in exchange for US dollars, causing the value of the Canadian dollar to decline.

Assume That Canada Places a Strict Quota on Goods Imported