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

When the U.S. places a strict quota on goods imported from Chile, this reduces the demand for Chilean goods in the U.S. Consequently, there will be a decreased demand for Chilean pesos in the U.S., causing the value of the peso to decline.

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