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The current interest rates are 2% in the US and in Mexico. Going out of the pandemic, the U.S. interest rates increase to 4% while
The current interest rates are 2% in the US and in Mexico. Going out of the pandemic, the U.S. interest rates increase to 4% while the Mexican interest rates increase to 5%. Other things being equal, how should this affect the equilibrium value of the Mexican peso relative to the US dollar (i.e. appreciation or depreciation)? Explain using the supply-demand framework. No actual calculation is required.
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