There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.An increase in income growth in Mexico relative to income growth in the United States will cause the

Question

Quizplus · Accepted Answer

An increase in income growth in Mexico relative to the United States would increase demand for Mexican goods, leading to a higher demand for pesos to buy those goods. This would cause the peso to appreciate and the dollar to depreciate, making both A and B correct.

There Is a Flexible Exchange Rate System and Only Two