If American demand for purchases of Mexican goods has increased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically

What will be an ideal response?

If Americans are demanding more Mexican goods, they must trade their dollars in the foreign exchange market for pesos. This increase in the supply of dollars is represented by the shift to the right of the supply curve for dollars below. As the supply of dollars increases, the equilibrium exchange rate falls (the dollar depreciates).