Suppose the Money Supply in Mexico Grows More Quickly Than

question 59

Multiple Choice

Suppose the money supply in Mexico grows more quickly than the money supply in the USA. We would expect that

• A) the Mexican peso should appreciate relative to the US dollar.
• B) the Mexican peso should depreciate relative to the US dollar.
• C) none of these answers
• D) the Mexican peso should maintain a constant exchange rate with the US dollar because of purchasing power parity.