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Case study 1: Shoe Quota Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and
Case study 1: Shoe Quota Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. 4. At a given exchange rate what does a quota do to desired net exports? As a result of this change which curve in the open-economy model shifts and which direction does it shift? 5. As a result of the quota, is there initially a surplus or a shortage in the market for foreign- currency exchange? Carefully explain how people's response to this surplus or shortage and the resulting changes in their behavior leads to a new equilibrium exchange rate. 6. Overall as a result of this change in policy, what happens to exports, imports, and net exports
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