Question

Assume that Canada places a strict quota on goods imported from the United States and that the United States does not retaliate. Holding other factors constant, this event should immediately cause the supply of Canadian dollars to be exchanged for U.S. dollars to __________ and the value of the Canadian dollar to __________.​A. increase, increase B. increase; decline C. decline, decline D. decline; increase

Answer 1

Answer:

D. decline; increase

Explanation:

As the restriction on imports reduce the demand of U.S dollar. The value of U.S dollars falls which increases the value of Canadian dollar. The supply of Canadian dollars to be exchanged for U.S dollars decrease and there is less payment to be made in U.S dollars. Canadian dollar will strengthen its position and increase its value.

Answer 2

Answer:

Decline, increase

Explanation:

Assume that Canada places a strict quota on goods imported from the United States and that the United States does not retaliate. Holding other factors constant, this event should immediately cause the supply of Canadian dollars to be exchanged for U.S. dollars to decline and the value of the Canadian dollar to increase.

Due to the impart of the quota imposed on the American goods, its importation will reduce thus reducing pressure on the Canadian dollars that will be exchanged to import the restricted goods hence a decline in its value. On the other hand, because of the reduce pressure to exchange the Canadian dollars to American dollars to engage in trade, the Canadian dollar will experience an increase.