Suppose that the Mexican government decides to fix or peg the dollar-peso exchange rate at P20 = $1. If foreign-exchange traders on one day want to exchange $60 million for pesos, to enforce the peg the Mexican government will need to come up with

Question

Quizplus · Accepted Answer

To enforce the peg of P20 = $1, the Mexican government will need to provide pesos equivalent to the dollars being exchanged. For $60 million, this means 60 million * 20 = P1,200 million.

Suppose That the Mexican Government Decides to Fix or Peg