Figure 13-2

-Refer to the FigurE₁3-2.If the economy were initially in equilibrium at r₀ and E₀ and the government removed import quotas,what would happen to the exchange rate?

Question

Figure 13-2
 
-Refer to the FigurE₁3-2.If the economy were initially in equilibrium at r₀ and E₀ and the government removed import quotas,what would happen to the exchange rate?

Quizplus · Accepted Answer

Removing import quotas would increase the supply of domestic currency in the foreign exchange market as more imports are purchased, leading to a depreciation of the currency to E₂.

Figure 13-2 -Refer to the FigurE₁3-2.If the Economy Were Initially in Equilibrium