Suppose the U.S.price level rose at the same time the Mexican price level remained constant.Which of the following would occur?
A) The demand for pesos would increase.
B) The supply of pesos would decrease.
C) The supply of pesos would increase.
D) The demand for pesos would decrease.
E) The supply of pesos would stay constant.

Question

Quizplus · Accepted Answer

If the U.S. price level rises while the Mexican price level remains constant, U.S. goods become relatively more expensive compared to Mexican goods. This would lead to an increase in demand for Mexican goods and services, thereby increasing the demand for pesos to facilitate these transactions.