Illustrate the effects of the following events on the dollar-peso exchange rate, i.e., the value of one peso in terms of dollars.
label the axes and explain how you arrived at your answer. (Hint: the x-axis should be labeled “pesos” and the y-axis labeled “dollars per peso”.)
A) Mexico's price level increases relative to the U.S. price level
B) Mexico's interest rates increase relative to U.S. interest rates
C) Tourism to Mexico increases
D) The U.S. economy weakens, leading to a decreased demand for Mexican imports