Holding all else constant,a decrease in the preferences of Canadians for Mexican goods will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

Question

Quizplus · Accepted Answer

A decrease in the preferences of Canadians for Mexican goods will lead to a decrease in the demand for Mexican goods, resulting in a decrease in the demand for Mexican pesos, and a decrease in the supply of Canadian dollars in the foreign exchange market. Therefore, there will be a decrease in the supply of dollars in the foreign exchange market, and the equilibrium Mexican peso-dollar exchange rate will increase.

Holding All Else Constant,a Decrease in the Preferences of Canadians