Question

Suppose you’re a Wisconsin farmer who sells corn to consumers in Mexico. How would the change in the exchange rate in 2015 probably affect your sales of corn to Mexico?

Answer 1

How the value of exchange rates affect exports or sales of corn in the mexico.

Suppose , current exchange rate is WIC $1 = MEX 65 PESO

CASE 1

Exchnge rate increases: WIC $1 = MEX 70 PESO

• WIC has appreciated and MEXICAN PESO has become cheaper.
• As Wisconsin CORN have become relatively cheaper, the US demand for corn or imports increases and export or sales of CORN increases. which earn low FOREX earning than before.

CASE 2

If exchange rate decreases: WIC $1 = MEX 60 PESO

• The WIC has depriciated and MEXICAN PESO  has become costlier.
• Now wisconsin CORN have become relatively costlier for MEXICO, the Mexican demand for corn or imports decreases
• but Wisconsin want to do more export or sales of CORN which earn High FOREX earning than before.