Final answer:
The imposition of an import quota on gouda cheese by the Canadian government affects the supply of cheese and may lead to higher prices within Canada. The quota can influence the Canadian dollar and real exchange rate depending on its impact on the trade balance and currency demand by cheese exporters.
Step-by-step explanation:
When the Canadian government imposes an import quota on gouda cheese, it directly affects the supply of gouda cheese in the Canadian market. This action is not directly related to interest rates, but rather to the quantity of cheese that can be imported into Canada, thus influencing the market for gouda cheese. If we assume the quota reduces the supply of gouda cheese and demand remains constant, it will likely lead to a higher price for gouda cheese within Canada due to scarcity.
These market dynamics may affect the Canadian dollar by influencing trade balance and potentially changing the demand for Canadian dollars in foreign exchange markets. If the Canadian dollar appreciates because the overall demand for imported cheese falls, and if cheese exporters to Canada hold significant market power, they may need to convert their own currency into fewer Canadian dollars to purchase the same amount of gouda. Conversely, if they cannot sell as much cheese due to the quota, they may demand fewer Canadian dollars overall, potentially affecting the real exchange rate depending on prevailing conditions in the currency markets.
In economic theory, depending on the specifics of trade relationships and market responses, an import quota could lead to an appreciation of the domestic currency in real terms if trade balances shift. Nevertheless, the answer to the student's question largely depends on assumptions about how traders react and how significant the quota is in the context of overall trade and currency demand.