Holding all else constant, an increase in the preferences of Americans for Mexican goods will ________ the supply of dollars in the foreign exchange market and ________ the equilibrium Mexican peso/U.S. dollar exchange rate.
A)increase; increase
B)increase; decrease
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

Increased preferences of Americans for Mexican goods will increase the supply of dollars in the foreign exchange market as Americans trade dollars for pesos. This decreases the exchange rate of pesos per dollar.

Holding All Else Constant, an Increase in the Preferences of Americans