Macro Unit 5, Question 6: Exchange Rate and Inflation

The video tutorial explains the market dynamics of the Mexican peso, focusing on how inflation in Mexico affects the demand and supply of pesos. It highlights that demand for pesos comes from other countries, while supply is from within Mexico. Due to inflation, demand decreases and supply increases, leading to a depreciation of the peso against the US dollar. The tutorial also provides insights into how test questions might address these economic concepts.

What happens to the demand for Mexican products when prices rise due to inflation?

Discuss the implications of an increase in supply of pesos on its exchange rate.