Question

The higher the u.s. dollar price per mexican peso, the_______mexican goods are for americans and the_____mexican goods americans will buy; thus pesos will be demanded.

a. less expensive; fewer, more
b. less expensive; more, fewer
c. more expensive; fewer, more
d. more expensive; fewer, fewer

Answer 1

The correct answer is option (d) which states that as the U.S. dollar price per Mexican peso increases, Mexican goods become more expensive for Americans, leading to Americans buying fewer Mexican goods, and thus an increased demand for pesos.

Step-by-step explanation:

The question assesses the relationship between the exchange rate of currencies and the demand for imported goods. When the U.S. dollar price per Mexican peso rises, each dollar can purchase fewer pesos. This means that for Americans, the cost to buy goods priced in pesos increases, which naturally makes Mexican goods more expensive. As a consequence, Americans will likely buy fewer Mexican goods when the peso is strong compared to the dollar. Consequently, the demand for pesos will increase as Americans need to exchange more dollars to get the pesos required for the fewer goods they are still purchasing.

The correct option that fits this statement is: The higher the U.S. dollar price per Mexican peso, the more expensive Mexican goods are for Americans and the fewer Mexican goods Americans will buy; thus pesos will be demanded, which corresponds to option (d. more expensive; fewer, fewer).

Answer 2

The higher the U.S. dollar price per Mexican peso, the more expensive Mexican goods become for Americans, leading them to buy fewer goods, thus resulting in less demand for pesos.

Step-by-step explanation:

The question is asking about the effect of the exchange rate between the U.S. dollar and Mexican peso on the cost of Mexican goods and the subsequent demand for Mexican goods by Americans. The correct answer to the question is: the higher the U.S. dollar price per Mexican peso, the more expensive Mexican goods are for Americans and the fewer Mexican goods Americans will buy; thus, pesos will be demanded less. This is explained by basic principles of currency exchange and purchasing power. If it takes more dollars to buy each peso, the price of goods priced in pesos goes up for American consumers. As a result, they are likely to buy less. This causes a decline in the demand for Mexican pesos among American consumers.

Looking at the provided figures and information, which discuss exchange rate markets and the factors that can affect exchange rates, such as expectations of future appreciation or depreciation, we can understand how these dynamics affect currency value. For example, if the peso is expected to strengthen, there would be increased demand now from those expecting to benefit from the appreciation. This would lead to a current appreciation of the peso. Conversely, if inflation in Mexico were higher, the peso's buying power decreases, causing its value to depreciate due to increased supply and decreased demand as investors find the peso less attractive.