Suppose that the exchange rate between the U.S.dollar and the Mexican peso starts out at $0.11 per peso.If the exchange rate then changes to $0.08 per peso,there will be a(n)__________ in the quantity demanded of dollars by Mexicans,and therefore there will be a(n)__________ in the quantity supplied of pesos to the foreign exchange market.

Question

Quizplus · Accepted Answer

When the exchange rate changes from $0.11 per peso to $0.08 per peso, it means that the Mexican peso has appreciated or become stronger compared to the U.S. dollar. As a result, Mexican consumers will now find U.S. goods and services more expensive, and the quantity demanded of dollars by Mexicans will decrease. At the same time, U.S. consumers will find Mexican goods and services cheaper, leading to an increase in the quantity supplied of pesos to the foreign exchange market. Therefore, there will be a decrease in the quantity demanded of dollars by Mexicans and a decrease in the quantity supplied of pesos to the foreign exchange market. The correct choice is (A).

Suppose That the Exchange Rate Between the U