Between 1993 and 2013, the Mexican peso fell against the U.S. dollar by almost three-fourths of its original value. However, economists have concluded that this did not result in a corresponding fall in the price of Mexican products expressed in dollars. What explains this apparent paradox?

Question

Quizplus · Accepted Answer

The higher inflation rate in Mexico relative to the United States meant that the prices of Mexican products expressed in dollars did not decrease despite the depreciation of the peso.

Between 1993 and 2013, the Mexican Peso Fell Against the U.S