Suppose the Price Indexes in Mexico and the U

question 5

Multiple Choice

Suppose the price indexes in Mexico and the U.S., which both began the year at 100, are at 160 and 103, respectively, by the end of the year. If the exchange rate began the year at Mex$= $1 and ended the year at Mex$5.9 = $1, then the change in the real value of the peso (a "?" indicates a real devaluation) during the year is

• A) 0%
• B) -5.0%
• C) 18.5%
• D)-8.2%

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