When a country imposes an import quota,its
A)net exports rise and its real exchange rate appreciates.
B)net exports rise and its real exchange rate depreciates.
C)net exports fall and its real exchange rate depreciates
D)None of the above is correct.

Question

Quizplus · Accepted Answer

An import quota restricts the quantity of goods that can be imported, which does not directly affect net exports (exports minus imports) since it primarily limits imports. The real exchange rate may appreciate due to reduced demand for foreign currency, but net exports do not necessarily rise.

When a Country Imposes an Import Quota,its