Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the economy were initially in equilibrium at r₀and E₀ and the government removed import quotas, what would happen to the exchange rate? A)It would appreciate to E₁. B)It would appreciate to E₂. C)It would depreciate to E₁. D)It would depreciate to E₂.

Question

Quizplus · Accepted Answer

Removing import quotas increases the supply of domestic currency in the foreign exchange market, leading to a depreciation of the currency to E₂.

Use the Figure Below to Answer the Following Questions