If Americans demand goods produced in Mexico,it leads to a demand for Mexican pesos and a supply of U.S.dollars on the foreign exchange market.

Question

Quizplus · Accepted Answer

When Americans demand goods produced in Mexico, they need to pay in Mexican pesos. This increases the demand for Mexican pesos, and thus, the exchange rate between the US dollar and Mexican pesos adjusts accordingly. At the same time, Americans would need to exchange US dollars for Mexican pesos, leading to a supply of US dollars on the foreign exchange market.

If Americans Demand Goods Produced in Mexico,it Leads to a Demand