Describe the differences between the demand curve and the supply curve for the Mexican peso in the foreign exchange market, and explain the reasons for their particular slopes.
What will be an ideal response?
The demand curve for any foreign currency, including the Mexican peso, is downward sloping. As the price of the peso falls relative to the U.S. dollar, Mexican products become relatively cheaper to U.S. consumers, who therefore buy more Mexican products. To do so, the quantity of pesos demanded by U.S. consumers will increase to buy more Mexican goods as the price of the peso falls. The supply curve for any foreign currency, including the Mexican peso, is upward sloping. As the price, or value, of the peso increases relative to the U.S. dollar, U.S. products will become relatively less expensive to Mexican buyers, who will thus increase the quantity of U.S. dollars they demand. Mexicans will, therefore, increase the quantity of pesos supplied to the United States by buying more U.S. products.
You might also like to view...
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
If marginal cost is less than average variable cost and output increases, average total cost ________ and average variable cost ________
A) increases; increases B) decreases; decreases C) decreases; increases D) increases; decreases
Vertical integration may be motivated by all of the following except:
a. Upstream market power b. Economies of ever wider spans of managerial control c. Technological interdependencies d. Reduced search and bargaining cost e. The hold-up problem.
Stagflation is generally caused by:
a. an increase in aggregate demand. b. a decrease in aggregate demand. c. an increase in aggregate supply. d. a decrease in aggregate supply.