At the original exchange rate an import quota
A)creates a surplus in the market for foreign-currency exchange,so the exchange rate rises.
B)creates a surplus in the market for foreign-currency exchange,so the exchange rate falls.
C)creates a shortage in the market for foreign-currency exchange,so the exchange rate rises.
D)creates a shortage in the market for foreign-currency exchange,so the exchange rate falls.

Question

Quizplus · Accepted Answer

An import quota limits the supply of foreign goods, creating a shortage in the market for foreign currency exchange. When the demand for foreign currency exceeds the available supply, the exchange rate will rise as buyers compete for the limited amount of foreign currency available.

At the Original Exchange Rate an Import Quota