If Mexico applies tariffs to imports of manufactured goods,Mexico's demand for foreign exchange will rise and the peso will depreciate under a system of floating exchange rates.

Question

Quizplus · Accepted Answer

If Mexico applies tariffs to imports, it would likely reduce the demand for foreign goods, decreasing the demand for foreign exchange, which could lead to an appreciation of the peso under a floating exchange rate system.

If Mexico Applies Tariffs to Imports of Manufactured Goods,Mexico's Demand