Suppose that Mexico and Canada both peg their currencies to the U.S. dollar. The relationship between the Mexican peso and the Canadian dollar is best described as a(n):
A) indirect peg.
B) fixed exchange rate system.
C) currency union.
D) free trade area.

Question

Quizplus · Accepted Answer

An indirect peg occurs when two currencies are pegged to a third currency. In this case, both the Mexican peso and the Canadian dollar are pegged to the U.S. dollar, creating an indirect peg between the peso and the dollar.

Suppose That Mexico and Canada Both Peg Their Currencies to the U.S