Other Things the Same, the Real Exchange Rate Between American

question 196

Multiple Choice

Other things the same, the real exchange rate between American and Mexican goods would be lower if

• A)prices of Mexican goods were higher, or the number of pesos a dollar purchased was higher.
• B)prices of Mexican goods were higher, or the number of pesos a dollar purchased was lower.
• C)prices of Mexican goods were lower, or the number of pesos a dollar purchased was higher.
• D)prices of Mexican goods were lower, or the number of pesos a dollar purchased was lower.

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Definitions:

Exchange

The act of trading goods, services, or financial instruments, which can occur in a physical or virtual marketplace.

Current Account

A segment of a nation's balance of payments that comprises the balance of trade, net primary income, and net secondary income.

Deficit

The amount by which expenses or costs exceed income or revenues, especially in the context of government budgets.

Surplus

A condition where the quantity supplied of a good exceeds the quantity demanded at the current price.