The following question focuses on the exchange rate between Mexican pesos and U.

Question

The following question focuses on the exchange rate between Mexican pesos and U.S. dollars, defined as the number of Mexican pesos you must pay for one dollar. Suppose that preferences for goods made in the United States change in Mexico, causing Mexican consumers to purchase fewer goods and services made In the United States. Drag the appropriate curve(s) or the following graph to illustrate how this change affects the market for dollars. A change In preferences that causes Mexican consumers to buy fewer U.S.-made goods and services will cause the Mexican peso to relative to the dollar.

Explanation / Answer

As mexican consumers purchase fewer goods which are produced in united states,so the demand for US dollar will decrease.And as a result of this change in preference Mexican peso will appriciate relative to dollar.

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