If the dollar appreciates against the Mexican peso, consumers in Mexico are likely to buy more local products, and consumers in the United States are likely to buy more Mexican products. This phenomenon is known as:
a. forward exchange rates.
b. currency pass through.
c. expenditure switching.
d. depreciation of the dollar.
Answer: c. expenditure switching.
You might also like to view...
If a price hike of 5 percent increases the quantity demanded of another good by 2 percent, the goods must be ________ and the cross elasticity of demand equals ________
A) substitutes; 0.40 B) substitutes; 2.5 C) complements; 0.40 D) complements; 2.5
When an entrepreneur introduces a new improved product that is highly valued relative to cost
a. consumers will be worse off. b. the demand for the products that are good substitutes for the new product will increase. c. some of the existing products will become obsolete and businesses producing those products will fail. d. total employment will decline if there are business failures.