Initially, the exchange rate between Lebanon and Mexico is in equilibrium. Now, assume that there is a decrease in demand for Mexican pesos.

As a result of this change, what will happen to Mexican pesos?
an appreciation
a depreciation
no change
Furthermore, a decrease in demand for Mexican pesos also results in winners and losers for various groups that are affected by the foreign exchange market. For the group in each example, indicate whether it is a winner or a loser in this change.
____ a tourist from Lebanon going on vacation to Mexico.
____ a mutual fund in Lebanon that purchases bonds in Mexico.
____ a family from Mexico visiting relatives in Lebanon.
____ a small firm in Mexico that sells DoDads in Lebanon.
____ a large firm in Lebanon selling chemicals in Mexico.
____ a multinational based in Mexico purchasing land in Lebanon.
Answer Bank: winner, loser

Public Answer

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