Question

When the Mexican government changes the fixed exchange rate of the peso relative to the U.S. dollar from 1.5 (pesos/U.S. dollar) to 3.0 (pesos/U.S. dollar), the peso is ________. When the foreign exchange market changes the equilibrium exchange rate of the euro relative to the U.S. dollar from 1.15 (U.S. dollars/euro) to 1.30 (U.S. dollars/euro), the euro is ________.

Answer 1

Answer:

The exchange rate measures the relationship between two currencies.

Explanation:

In the first case, the depreciated peso., Because before it needed 1.5 pesos to buy a dollar, now it takes 3 pesos to buy 1 dollar. In the second case, the dollar depreciated. As in the first case, it takes more dollar to buy a euro. It used to be $ 1.15 to buy one euro, now $ 1.3 is needed.