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Income level and currency value

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A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming everything else remaining constant) a(n) ______ in Mexican demand for U.S. goods, and the Mexican peso should _______.

A) increase; appreciate
B) increase; depreciate
C) decrease; depreciate
D) decrease; appreciate.

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The solution examines the effect of an increase in income level on currency value.

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A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming everything else remaining constant) a(n) ...

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