Question

5. State whether each of the following events will shift the demand or supply of Argentine pesos, to the left or the right and whether, as a result, the peso will appreciate or depreciate. • Because Argentina has resolved its international debt problems, US and European investors begin buying Argentine stocks. • Rapid growth in Argentina causes Argentines to buy foreign-made automobiles. • Concerns about mad cow disease in Argentine cattle causes the country’s exports of beef to plummet.

Answer 1

A - Because of greater demand for stocks of Argentina , the demand for the peso will increase. This will lead to rightward shift in demand for Peso. The value of currency will increase and the currency will appreciate

B - As a result of greater demand for the foreign goods , the demand for Peso will decrease. The demand curve will shift to left. This will lead to the deppreciation of Peso

C - As a result of the lesser exports , the supply of Peso in the economy will decline. This will lead to the leftward shift in the supply curve of Peso leading to the Appreciation of Peso.