Suppose that the exchange rate between Mexican pesos and dollars is 8 pesos per dollar. If the exchange rate goes to 6 pesos per dollar, it would tend to:

Question

Quizplus · Accepted Answer

When the exchange rate between the Mexican pesos and the dollar decreases, it means that the dollar can buy a larger amount of pesos. This makes Mexican goods cheaper for U.S. consumers, which leads to an increase in demand for Mexican goods and increases U.S. exports to Mexico. Thus, the correct answer is (B) to increase U.S. exports to Mexico.

Suppose That the Exchange Rate Between Mexican Pesos and Dollars