Question

Following a peso appreciation relative to the dollar, which of the following results is expected to occur?

Answer 1

Answer:

B

Explanation:

A currency appreciates when its value increases.

For example if $1 was exchanged for 50 pesos. After appreciation of the pesos, $1 would buy $25 pesos.

So more $2 would be needed to buy 50 peso after the appreciation when before the appreciation $1 was buying 50 pesos.

As a result Mexican goods would become more expensive to US consumers and the revenue earned by Mexican producers would increase