Question:

How would a sudden jump in u.s. prices affect

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a. imports from mexico

b. exports to mexico

c. u.s. aggregate demand

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2 ANSWERS


  1. I think we would buy more imports, mexicans would demand less US products as they are more expensive, leading to less exports to mexico.  US aggregate demand would go down.


  2. US would import more from Mexico as it would be cheaper, US could not export as much to Mexico because of the rise in prices, and US aggregate demand would fall due to the overall rise in US prices.

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