If Mexico has foreign assets worth $100 billion and no liabilities, a 15% depreciation of the peso will result in a(n):
A) increase in liabilities at home by 100 billion pesos.
B) decrease in assets at home by 150 billion pesos.
C) decrease in overall wealth by 15%.
D) increase in overall wealth.

Question

Quizplus · Accepted Answer

A depreciation of the peso increases the local currency value of foreign assets. If Mexico's assets abroad are worth $100 billion, a 15% depreciation of the peso means these assets are now worth 15% more in pesos, increasing overall wealth in local currency terms.

If Mexico Has Foreign Assets Worth $100 Billion and No