What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?
A) the real interest rate increases
B) the real interest rate decreases
C) the real exchange rate increases
D) the real exchange rate decreases

Question

Quizplus · Accepted Answer

An import quota on Gouda cheese would likely lead to a decrease in the supply of Gouda cheese in Canada, which could increase the price of Gouda cheese domestically. This could lead to an appreciation of the Canadian dollar, as fewer imports mean less demand for foreign currency, thus increasing the real exchange rate.

What Happens in Canada When the Canadian Government Imposes an Import