Following the economic crisis in 1994–1995, the Mexican peso fell sharply in value. What will be the main economic effects in Mexico of such an exchange rate change?
A. It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well.
B. It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well.
C. It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise, and output may rise as well.
D. It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall, and output may fall as well.
Answer: C
You might also like to view...
The opportunity cost of a college education does not include any income that is foregone while enrolled in school, since this is not measured using monetary costs.
Answer the following statement true (T) or false (F)
Derive the budget line equation for the case where good 1 is a composite good. What is the vertical intercept and what is the slope?
What will be an ideal response?
If bond investors think they lack enough details to evaluate the likelihood of defaults on certain bonds, this will result in higher:
A) expected return B) liquidity C) information costs D) expected inflation
Since classical economists believe that both V and Q are constants, the equation of exchange becomes a theory in which
a. the quantity of money explains prices b. the quantity of money explains velocity c. the quantity of money explains real GDP d. changes in M cause changes in V e. prices are never flexible