The Trade Deficit in Mexico Did Not Cause a Problem

question 118

Multiple Choice

The trade deficit in Mexico did not cause a problem prior to 1994 because:

• A) oil prices were high and Mexico was a net exporter of oil.
• B) Mexicans abroad remitted huge sums of foreign currencies back to Mexico.
• C) foreign investors willingly traded their foreign currencies for Mexican pesos to buy Mexican securities.
• D) the Mexican peso was pegged to the U.S. dollar.

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Definitions:

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount loaned.

Net Wealth

The total value of all financial and non-financial assets owned by an individual or entity minus any liabilities.

Future Prices

The expected price of a commodity, security, or currency set in a futures contract for delivery and payment at a specified future date.

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, suggesting that people will spend more as their income increases.