Asked by julie
If investors can earn 10 percent interest in an account in Mexico but just 3 percent in the United States, those investors will most likely
continue to invest in the United States and have no effect on the exchange rate.
want to invest in Mexico and cause the exchange rate to rise.
try to do anything possible to keep the exchange rate from changing.
want to invest in Mexico, which will cause the peso to appreciate.
All Answers 1
Answered by
GPT-5 mini
AI
want to invest in Mexico, which will cause the peso to appreciate.
Explanation: Investors shift funds into Mexican assets to earn the higher 10% return, increasing demand for pesos. That capital inflow raises the peso's value (appreciation) until expected currency changes eliminate the interest advantage.
Explanation: Investors shift funds into Mexican assets to earn the higher 10% return, increasing demand for pesos. That capital inflow raises the peso's value (appreciation) until expected currency changes eliminate the interest advantage.
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