Suppose that Mexican prices are rising more quickly than U.S. prices. In this case the demand for Mexican products is likely to:
A) rise.
B) fall.
C) remain constant.
D) have a parallel demand for U.S. products.
E) not affect the exchange rate.

Question

Quizplus · Accepted Answer

When Mexican prices rise more quickly than U.S. prices, Mexican products become relatively more expensive. This typically leads to a decrease in demand for Mexican products as consumers and businesses look for cheaper alternatives, including those from the U.S. or other countries.

Suppose That Mexican Prices Are Rising More Quickly Than U