When the Mexican peso gets "stronger" relative to the dollar,
A)the U.S.trade deficit with Mexico rises.
B)the U.S.trade deficit with Mexico falls.
C)the U.S.trade deficit with Mexico is unchanged.
D)None of the above necessarily happens.

Question

Quizplus · Accepted Answer

When the Mexican peso gets stronger relative to the dollar, Mexican exports become more expensive for U.S. consumers, which leads to a decrease in the demand for those goods. As a result, the U.S. imports less from Mexico, and the trade deficit between the two countries falls.

When the Mexican Peso Gets "Stronger" Relative to the Dollar