One U.S. dollar was worth 16 Mexican pesos in 2009, but in 2011 the U.S. dollar is worth 14 Mexican pesos. What is a likely result of this change in the U.S. dollar’s exchange value?
It will cost more for Mexicans to vacation in the United States.
Americans will pay less for goods produced in Mexico.***
Americans will pay more for goods produced in Mexico.
It will cost less for Americans to vacation in Mexico.
To determine the likely result of the change in the U.S. dollar's exchange value, we need to understand how currency exchange rates affect trade between countries. In this case, the exchange rate has shifted from 16 Mexican pesos per U.S. dollar in 2009 to 14 Mexican pesos per U.S. dollar in 2011.
A decrease in the exchange rate (from 16 pesos to 14 pesos) means that the U.S. dollar has strengthened relative to the Mexican peso. So, when Americans want to buy Mexican goods, they will now need fewer U.S. dollars to obtain the same amount of Mexican pesos. This suggests that Americans will pay less for goods produced in Mexico, as stated in option B.
On the other hand, when Mexicans want to buy American goods or travel to the United States, they will now need more Mexican pesos to obtain the same amount of U.S. dollars. This implies that it will cost more for Mexicans to vacation in the United States, as stated in option A.
Therefore, the likely result of this change in the U.S. dollar's exchange value is that Americans will pay less for goods produced in Mexico (option B) and it will cost more for Mexicans to vacation in the United States (option A).