QUESTION IMAGE
Question
if investors can earn 10 percent interest in an account in mexico but just 3 percent in the united states, those investors will most likely
want to invest in mexico and cause the exchange rate to rise.
try to do anything possible to keep the exchange rate from changing.
want to invest in mexico, which will cause the peso to appreciate.
continue to invest in the united states and have no effect on the exchange rate.
This problem relates to international investment and exchange rates, which falls under Economics (a subfield of Business). When investors can earn a higher interest rate in Mexico (10%) compared to the US (3%), they will want to invest in Mexico. To invest in Mexico, they need to buy Mexican pesos, increasing the demand for pesos. An increase in demand for a currency causes it to appreciate. So the option "want to invest in Mexico, which will cause the peso to appreciate" is correct. Other options are incorrect: continuing to invest in the US (lower return) is illogical; trying to keep exchange rates stable is not related to this interest rate differential; and investment in Mexico does affect the exchange rate.
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want to invest in Mexico, which will cause the peso to appreciate.