Would each of the following groups be happy or unhappy if the Mexican peso appreciates against the U.S. dollar? Answer the question for each of the following:
(a) The U.S. pension funds holding Mexican government bonds
(b) U.S. tourists planning a trip to Mexico
(c) Mexican exporting manufacturers
(d) A Mexican firm trying to buy properties overseas
(a) Happy. The Mexican bonds are a safe haven for U.S. pension holders for now.
(b) Unhappy. It now costs more to travel to Mexico.
(c) Unhappy. The goods and services of Mexican exporters become relatively more expensive than their counterparts in the United States.
(d) Happy. The Mexican peso can buy more American dollar and thus more property than would be the case otherwise.
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The demand for dollars in the foreign exchange market will decrease and hence the demand curve for dollars will shift leftward if
A) the U.S. interest rate differential decreases. B) the expected future exchange rate rises. C) the exchange rate for the dollar rises. D) the U.S. interest rate differential increases.
American companies can borrow funds
A) only in U.S. financial markets. B) only in foreign financial markets. C) in both U.S. and foreign financial markets. D) only from the U.S. government.
The rule guiding international specialization of production is that a country should specialize in the production of the good
a. for which it has the highest opportunity cost b. for which it has the lowest opportunity cost c. that it most wants to consume d. for which it has an absolute advantage e. that it can produce with the least quantity of capital
Critics of advertising argue that advertising
a. creates desires that otherwise might not exist. b. enhances competition. c. benefits television viewers who enjoy TV commercials. d. All of the above are correct.