Suppose a hefty rise in the demand for Mexican pesos create a chronic shortage of this currency in the foreign exchange market.Which of the following steps should be adopted by the Mexican government to eliminate this shortage?
A)The government should impose a ban on Mexican exports.
B)The government should devalue the peso.
C)The government should print more pesos to increase its supply.
D)The government should allow the peso to appreciate.
E)The government should allow the peso to depreciate.

Question

Quizplus · Accepted Answer

Allowing the peso to appreciate would increase its value, making it more expensive for foreign buyers and reducing the demand, thus eliminating the shortage.

Suppose a Hefty Rise in the Demand for Mexican Pesos