Question

Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.12 per peso, and then changes to $0.09 per peso. The result will be that Americans will buy __________ pesos because Mexican goods become relatively __________ expensive.

Answer 1

Answer:

The result will be that Americans will buy more pesos because Mexican goods become relatively less expensive.

Explanation:

If the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.12 per peso, and then changes to $0.09 per peso it means that people would receive more Mexican pesos for its dollars as 1 peso used to cost $0.12 and it now costs $0.09. If a product costs $100 pesos, when the exchange rate is $0.12 per peso, it costs Americans $12 pesos and when the exchange rate is $0.09 per peso, it costs $9 pesos which indicates that the price of the product decreases. This means that Mexican products will be cheaper for Americans and because of that the answer is that Americans will buy more pesos because Mexican goods become relatively less expensive.