The U.S.demand for pesos would shift to the right if there occurred a (an):
A) Change in preferences toward U.S.manufactured goods
B) Increase in the dollar/peso exchange rate
C) Decrease in the U.S.population
D) Increase in the U.S.price level

Question

Quizplus · Accepted Answer

An increase in the U.S. price level would lead to an increase in the demand for pesos as U.S. imports would become relatively more expensive and Mexican exports would become relatively cheaper. This would result in an increase in the demand for pesos to conduct transactions for these cheaper Mexican goods. Therefore, the U.S. demand for pesos would shift to the right.

The USDemand for Pesos Would Shift to the Right If There