Suppose the Mexican Nominal Exchange Rate Does Not Change,but Prices

question 19

Multiple Choice

Suppose the Mexican nominal exchange rate does not change,but prices rise faster abroad than in Mexico.Based on this information,the Mexican real exchange rate

• A)does not change.
• B)rises.
• C)declines.
• D)None of the above is necessarily correct.

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Definitions:

Money Supply

The overall sum of financial resources present in an economy at a given moment.

Open Market Operations

are actions taken by central banks to buy or sell government securities in the open market to control the money supply and influence interest rates.

Federal Reserve Notes

The paper currency issued by the Federal Reserve System in the United States, serving as the nation's primary form of legal tender.

Checkable Deposits

Bank account balances that are readily available for withdrawal and can be used for making payments, such as in checking accounts.