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Category: Economics
What does it mean to say that the U.S. dollar has depreciated in value in relation to the Mexican peso? What does it mean to say that the Mexican peso has appreciated in value relative to the U.S. dollar?
Editor July 16, 2021 22:02
Explanation The flexible exchange rate system is a system in which exchange rates are determined by the forces of demand and supply of a currency. Depreciation is a decrease in (View full solution)
Category: Economics
Explain the link between the Mexican demand for U.S. goods and the supply of pesos. Next, explain the link between the U.S. demand for Mexican goods and the supply of dollars.
Editor July 16, 2021 21:18
Explanation In the foreign exchange market, currencies of different countries are exchanged. If a person from Country M needs to buy a product produced by Country U, one has to (View full solution)
Category: Economics
Under a fixed exchange rate system, why might the United States want to devalue its currency?
Editor July 16, 2021 21:17
Explanation Devaluation is a government action that changes the exchange rate by lowering the official price of a currency. Devaluation occurs when the official price of a currency is lowered. (View full solution)
Category: Economics
How does an overvalued dollar affect U.S. exports and imports?
Editor July 16, 2021 21:15
Explanation When a currency's value in terms of any other currency is more than its equilibrium rate, it is said to be overvalued. When a country's currency is overvalued, people (View full solution)
Category: Economics
Under a fixed exchange rate system, if one currency is overvalued, then another currency must be undervalued. Explain why this statement is true.
Editor July 16, 2021 21:14
Explanation The fixed exchange rate is determined by the authorities as an official price. If the fixed exchange rate exceeds the equilibrium exchange rate in terms of the other currency (View full solution)