An increase in U.S. exports to Mexico increases the ________ for U.S. dollars and increases the ________ of pesos.

Question

Quizplus · Accepted Answer

An increase in U.S. exports to Mexico will increase the demand for U.S. dollars as Mexican importers will need to exchange their pesos for dollars to pay for the goods. This increased demand for dollars will lead to an appreciation of the value of the dollar and a decrease in the value of the peso, as there will be a surplus of pesos in the market as Mexican importers exchange them for dollars. Therefore, the correct choice is A, which identifies an increase in demand for U.S. dollars and an increase in the supply of pesos.

An Increase in U