If interest rates in Mexico decrease while the interest rates in the United States remain unchanged then

Question

Quizplus · Accepted Answer

When interest rates in Mexico decrease, it becomes less attractive to hold Mexican pesos and more attractive to invest in other currencies with higher interest rates such as the U.S. dollar. This results in an increase in the supply of Mexican pesos as investors try to sell them off, while the supply of U.S. dollars will remain unchanged. Therefore, the correct answer is B.

If Interest Rates in Mexico Decrease While the Interest Rates