In 2002,the United States imposed restrictions on the importation of steel into the United States.Our open-economy macroeconomic model shows that such a policy would
A)lower the real exchange rate and increase net exports.
B)lower the real exchange rate and have no effect on net exports.
C)raise the real exchange rate and decrease net exports.
D)raise the real exchange rate and have no effect on net exports.

Question

Quizplus · Accepted Answer

Import restrictions reduce the supply of foreign currency, raising the real exchange rate, but net exports remain unchanged as the policy does not affect the overall trade balance.

In 2002,the United States Imposed Restrictions on the Importation of Steel