Asked by George Greer on Jul 24, 2024
Verified
Suppose that the Mexican government decides to fix or peg the dollar-peso exchange rate at P20 = $1. If foreign-exchange traders on one day want to exchange $60 million for pesos, to enforce the peg the Mexican government will need to come up with
A) P1,200 million.
B) P0.33 million.
C) P3 million.
D) P80 million.
Dollar-Peso Exchange Rate
The rate at which the currency of one country (dollar) can be exchanged for the currency of another country (peso), influencing international trade and investment.
Mexican Government
The federal constitutional republic of Mexico, which is governed by a president and a bicameral legislature.
- Learn about the mechanisms available to governments for maintaining constant exchange rates.
Verified Answer
DR
Danyal RizwanJul 27, 2024
Final Answer :
A
Explanation :
To enforce the peg of P20 = $1, the Mexican government will need to provide pesos equivalent to the dollars being exchanged. For $60 million, this means 60 million * 20 = P1,200 million.
Learning Objectives
- Learn about the mechanisms available to governments for maintaining constant exchange rates.
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