Author Question: Suppose a hefty rise in the demand for Mexican pesos create a chronic shortage of this currency in ... (Read 23 times)

Coya19@aol.com · **on:** Jun 30, 2018

Suppose a hefty rise in the demand for Mexican pesos create a chronic shortage of this currency in the foreign exchange market. Which of the following steps should be adopted by the Mexican government to eliminate this shortage?
a. The government should impose a ban on Mexican exports.
b. The government should devalue the peso.
c. The government should print more pesos to increase its supply.
d. The government should allow the peso to appreciate.
e. The government should allow the peso to depreciate.

Question 2

If at current exchange rates it was cheaper to buy a product in country B than country A, we would expect people to sell country A's currency and buy country B's currency, according to the purchasing power parity theory.
a. True
b. False
Indicate whether the statement is true or false