Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Mexico's exports to Canada will increase due to cheaper prices.
B
Mexico's exports to Canada will decrease as they become more expensive.
C
The trade balance will remain unchanged regardless of currency fluctuations.
D
Canadians will demand more pesos for their goods, making exports cheaper.
Understanding the Answer
Let's break down why this is correct
Answer
When the Canadian dollar appreciates against the peso, it means that the Canadian dollar becomes stronger compared to the Mexican peso. This change makes goods from Mexico more expensive for Canadian buyers because they need to use more Canadian dollars to buy the same amount of pesos. As a result, Canadians might buy fewer Mexican products since they are now pricier. For example, if a pair of shoes costs 100 pesos, and the exchange rate changes so that it now costs 110 pesos in Canadian dollars, Canadians may decide to buy shoes made in Canada instead. Therefore, Mexico's exports to Canada are likely to decrease because of the stronger Canadian dollar.
Detailed Explanation
When the Canadian dollar gets stronger, it means Canadians need more pesos to buy Mexican goods. Other options are incorrect because This answer suggests that prices go down, but that's not true; This answer thinks currency changes don't matter, but they do affect prices.
Key Concepts
Currency appreciation and depreciation
Impact on trade balance
Net exports
Topic
Currency Exchange and Trade Balance
Difficulty
easy level question
Cognitive Level
understand
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