In the early 1990s, the inflation rate in Mexico was twice the rate in the United States, but the Mexican monetary authorities kept the peso / dollar exchange rate almost constant. For Mexican consumers
A) incomes rose dramatically.
B) interest rates fell to compensate for increased inflation.
C) Mexican products became less expensive while U.S.-made products became comparatively more expensive.
D) Mexican products became more expensive while U.S.-made products became comparatively less expensive.
E) U.S.-made products became less attractive to purchase.

Question

Quizplus · Accepted Answer

With a higher inflation rate, the prices of Mexican-made products would increase faster than in the US, making them more expensive compared to US-made products. Therefore, Mexican products became more expensive while US-made products became comparatively less expensive.

In the Early 1990s, the Inflation Rate in Mexico Was