If the Canadian dollar appreciates with respect to the Mexican peso, what is the likely impact on Canada's balance of trade with Mexico?(1 point)

Question

Responses

The stronger dollar increases imports from Mexico, decreasing Canada's balance of trade with Mexico.
The stronger dollar increases imports from Mexico, decreasing Canada's balance of trade with Mexico.

The stronger dollar decreases imports from Mexico, decreasing Canada's balance of trade with Mexico.
The stronger dollar decreases imports from Mexico, decreasing Canada's balance of trade with Mexico.

The stronger dollar decreases imports from Mexico, increasing Canada's balance of trade with Mexico.
The stronger dollar decreases imports from Mexico, increasing Canada's balance of trade with Mexico.

The stronger dollar increases imports from Mexico, increasing Canada's balance of trade with Mexico.

Answer 1

If the Canadian dollar appreciates with respect to the Mexican peso, it means that Canadian consumers can buy more Mexican goods for the same amount of CAD. This typically leads to an increase in imports from Mexico, as Canadian consumers find Mexican goods cheaper. As a result, Canada's balance of trade with Mexico would likely decrease because imports from Mexico would rise.

Based on this analysis, the correct statement would be:

The stronger dollar increases imports from Mexico, decreasing Canada's balance of trade with Mexico.