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so in this question its asking about the foreign exchange market for Mexican pesos Ive drawn the graph to help you out weve got the demand for pesos the supply of pesos what goes down here for quantity remember this is the quantity of pesos now what goes up here what do you label this the problem of the question it doesnt tell us what currency were comparing pesos to but we have enough information to figure out the International value of the peso in other words whats going to happen to the value of the peso compared to its major trading partners for this example lets just compare pesos to United States dollars so the price of pesos how many dollars you get for each peso thats the exchange rate the scenario the question gives us is that theres higher inflation in Mexico and it asked what happens to the demand what happens to the supply of Mexican pesos the demand for Mexican pesos is not done by people living in Mexico this is demand from other countries but people in Mexico su
