ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Mexican exports decline
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Mexican exports increase
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Mexican imports decline
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Mexican imports increase
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Detailed explanation-1: -Changes in the exchange rate tend to directly affect domestic prices of imported goods and services. A stronger peso lowers the peso prices of imported goods as well as import-intensive services such as transport, thereby lowering the rate of inflation.
Detailed explanation-2: -If the value appreciates (or goes up), demand for the currency also rises. In contrast, if a currency depreciates, it loses value against the currency against which it is being traded.
Detailed explanation-3: -A strong currency means a country exports less, and has lower net exports. Therefore, a strong currency can potentially lower real GDP.
Detailed explanation-4: -The imports from the United States decreased after the devaluation (see Table 1). Due to the new exchange rate, few people had the money to buy foreign-made products; many imported goods left the Mexican market. Therefore, Mexican producers covered that demand increasing their sales.