1 Peso (Mexico) = 0.06 USD (United States Dollar)

Question

1 Dinar (Kuwait) = 3.25 USD (United States Dollar)

According to the data above, a US consumer would maximize their purchasing power in which country?

(2 points)
Responses

Mexico
Mexico

The United States
The United States

Kuwait
Kuwait

purchasing power would remain constant

Answer 1

To determine where a US consumer would maximize their purchasing power, we can compare the value of the currencies given the exchange rates.

1. Exchange Rate for Mexico:

   • 1 Peso = 0.06 USD
   • Therefore, 1 USD = \( \frac{1}{0.06} \approx 16.67 \) Pesos

2. Exchange Rate for Kuwait:

   • 1 Dinar = 3.25 USD
   • Therefore, 1 USD = \( \frac{1}{3.25} \approx 0.31 \) Dinars

Now, if we consider purchasing power:

• In Mexico, a US consumer can exchange 1 USD for around 16.67 Pesos, which means they can have a large amount of local currency to spend.

• In Kuwait, a US consumer can exchange 1 USD for about 0.31 Dinars, which means they would receive a significantly smaller local currency amount to spend compared to Mexico.

Based on these calculations, a US consumer would maximize their purchasing power in Mexico, as they would receive more local currency (Pesos) for each USD compared to Kuwait (Dinars).

So the correct response is: Mexico.