Suppose that the U.S.imposes an import quota on lumber.The quota makes the real exchange rate of the U.S.dollar
A)appreciate but does not change the real interest rate in the United States.
B)appreciate and the real interest rate in the United States increase.
C)depreciate and the real interest rate in the United States decrease.
D)depreciate but does not change the real interest rate in the United States.

Question

Quizplus · Accepted Answer

An import quota reduces the supply of foreign goods, increasing demand for domestic currency, causing the real exchange rate to appreciate. It does not directly affect the real interest rate.

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