If the U.S.inflation rate falls relative to the Mexican inflation rate,which of the following will happen in the market for pesos?
A) A rightward shift of the demand curve,a leftward shift of the supply curve,and an appreciation of the peso
B) A leftward shift of the demand curve,a rightward shift of the supply curve,and an appreciation of the peso
C) A leftward shift of the demand curve,a leftward shift of the supply curve,and a depreciation of the peso
D) A rightward shift of the demand curve,a rightward shift of the supply curve,and an appreciation of the peso
E) A leftward shift of the demand curve,a rightward shift of the supply curve,and a depreciation of the peso.

Question

Quizplus · Accepted Answer

If U.S. inflation falls relative to Mexico's, U.S. goods become relatively cheaper, reducing demand for pesos as fewer people buy Mexican goods. Simultaneously, Mexicans may buy more U.S. goods, increasing the supply of pesos, leading to a depreciation of the peso.

If the USinflation Rate Falls Relative to the Mexican Inflation Rate,which of Rate,which