If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus

Question

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When the exchange rate changes from $1 = 100 pesos to $1 = 5 pesos, the dollar strengthens significantly against the peso. This means that U.S. goods become more expensive for Mexican consumers, leading to a decrease in U.S. exports to Mexico. However, the question states that U.S. exports to Mexico increase, which seems counterintuitive given the exchange rate movement. The correct interpretation, considering the broader economic implications and the usual effects of such a significant exchange rate change, would be that U.S. imports from Mexico (B) are likely to increase because Mexican goods become cheaper for U.S. consumers. This would also mean Mexican exports to the United States increase. However, without additional context or clarification, the provided answer focuses on the direct implication of the question's wording, which might not fully capture the typical economic outcomes of such a scenario.

If the Exchange Rate Between the United States and Mexico