A Mexican flour mill buys wheat from the United States and pays for it with pesos.Other things the same,Mexican

Question

Quizplus · Accepted Answer

When the Mexican flour mill buys wheat from the United States and pays for it with pesos, the demand for U.S. dollars decreases, which results in a decrease in the exchange rate between the two currencies. As a result, U.S. exports to Mexico decrease, and imports from Mexico increase, leading to a decrease in net exports. At the same time, the Mexican flour mill is using pesos to pay for wheat, which is a use of Mexican capital, resulting in an increase in U.S. net capital outflow.

A Mexican Flour Mill Buys Wheat from the United States